Nike retains Olympic hopes as Adidas-Reebok join race

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: The proposed combination of Adidas-Salomon AG and Reebok International Ltd. will help the companies open more stores and compete against Nike Inc. for leadership in China, the world’s fastest-growing athletic gear market. ‘‘We are growing faster in China than Nike and together with Reebok we are bigger,’’ Adidas CEO says Herbert Hainer. ‘‘We can offer our full organisation in China to help Reebok build stores.’’

Adidas, the No. 2 athletic-shoe and apparel maker, and larger rival Nike are opening locations in China ahead of the 2008 Olympic Games, which is expected to accelerate demand for sports gear. Adidas’s 1,300 sales locations in China, compared with 2,000 for Nike, will benefit from Reebok’s endorsement pact with Houston Rockets centre Yao Ming of the National Basketball Association. Says Paul Spindler, who helps manage $2.5 billion at Pittsford, New York- based Clover Capital Management, ‘‘Nike has a head start. Adidas would like to be larger as the China opportunity unfolds.’’

Nike’s estimates suggest it will maintain its lead in China after the merger. Nike said it has 30% of the Chinese athletic market, trailed by Adidas’s 19%. The inclusion of Reebok will catapult Adidas’s share to 27%, according to Beaverton, Oregon-based Nike.

Retail contacts

Nike and Herzogenaurach, Germany-based Adidas both have subsidiaries in China and operate stores with local partners. Canton, Massachusetts-based Reebok sells its wares through distributors, which means it doesn’t have direct control of its business. ‘‘Reebok will be introduced to these retailers that are now selling Adidas products,’’ said Mark Josefson, a Frankfurt, Germany-based analyst at Kepler Equities who rates Adidas ‘‘buy.’’ The $3.8 billion purchase of Reebok may also allow Adidas to reduce costs and consolidate buying between the two brands. Adidas said it expects to save $150 million over the next three years after the completion of the transaction. If Adidas achieves cost efficiencies, it’ll compete with Nike better,” says Bob Rodriguez, First Pacific Advisors, Reebok’s sixth-largest shareholder. ‘‘Sourcing is a natural combination,’’ says Reebok CEO Paul Fireman.

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