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Key Facts about Adidas' Takeover of Reebok
2006-01-26 10:49:16

The European Commission gave German sporting goods maker Adidas (ADSG.DE: Quote, Profile, Research) the green light on Tuesday for its $3.8 billion acquisition of U.S. rival Reebok (RBK.N: Quote, Profile, Research) in the biggest sector takeover for years.

The takeover will merge the world's number two, Adidas, and number three, Reebok, creating a serious challenger to market leader Nike (NKE.N: Quote, Profile, Research).

Here are main issues of the deal:

- Adidas plans to buy the outstanding shares of Reebok for $59 apiece in cash, valuing the transaction at $3.8 billion. Reebok's executive board has agreed to the deal.

- Adidas has said it will pay for the acquisition with a mix of equity and debt. It raised 648 million euros ($795 million) by selling new shares in November and has also secured a 2 billion euro revolving credit agreement, which might help as a back-up. Shares will be bought only after Reebok shareholders have given the go-ahead for the deal, according to Adidas.

- The deal will create a firm with combined annual sales of around $11 billion. Global market leader Nike (NKE.N: Quote, Profile, Research) posted sales of $13.7 billion in its 2004/05 fiscal year.

- Adidas expects the deal to boost net income by more than 10 percent in the medium term. Sales are seen growing at a mid- to high single-digit rate, while cost savings are expected to reach 125 million euros annually by the third year once the deal is done.

- Reebok will become a separate brand within the new group, supplementing the key Adidas and small golf sports units Taylormade and Maxfli. All brands will report to Adidas' executive board in the Herzogenaurauch headquarters near Nuremberg, where Puma (PUMG.DE: Quote, Profile, Research), the global number four, is also based.

- The deal is set to enhance Adidas' position in the United States, which accounts for 50 percent of the sports footwear market alone. According to industry magazine Sporting Goods Intelligence, Nike holds an estimated 36 percent of the U.S. market, Reebok around 12.2 percent and Adidas 8.9 percent.

- Adidas will bring its competence in soccer sportswear, where it is global market leader with an estimated share of 35 percent. To fend off competition, the firm has secured long-term sponsoring contracts with the national teams of Germany, France and major European clubs such as Bayern Munich, Real Madrid and AC Milan.

- Adidas is also strong in running and basketball sportswear, particularly in its home markets Europe and Germany as well as in Asia.

- In contrast, Reebok has a much better position in the lifestyle fashion market, where Adidas has been struggling to imitate the success of Puma. Reebok is also known for womenswear, aerobic and fitness sportswear.

- Reebok will also bring in important sponsoring license contracts with major North American professional leagues such as the National Hockey League, National Basketball League, National Football League and Major League Baseball. ($1=.8144 euro)

(Source: Reuters)

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