Adidas does it, buys Reebok for $3.8 bn

London, New Delhi, Aug 3 | Updated: Aug 4 2005, 06:34am hrs
Adidas-Salomon AG, the worlds second-largest sporting-goods company, agreed to buy Reebok International for about $3.8 billion to narrow the gap with Nike Inc.

Adidas is offering $59 for each share of the Massachusetts-based Reebok, 34% more than Tuesdays closing price. The combined company will have about $11.1 billion in sales, compared with Nikes $13.7 billion.

The purchase, Adidass biggest since its 1998 acquisition of ski and golf-equipment maker Salomon, will double sales in the US, Nikes home market. It will also give Herzogenaurach, Germany-based Adidas, a bigger presence in American sports and culture, chief executive Herbert Hainer said.

It propels them up in the US, said Mark Hargraves at Framlington Group. The US market is historically where theyve been under represented and its been difficult to gain share. So in one jump it moves them up.

Adidas market share in the US will double with the purchase. The company had an 8.9% share of the $8.9 billion wholesale US athletic-shoe market last year. Reebok controlled 12%, and Beaverton, Oregon-based Nike had 36%. The transaction will give Adidas 28% of the global $11.5 billion athletic-shoe market, rivalling Nikes 31% and widening the lead over cross-town rival Puma AG.

Adidas will get Reeboks clothing business, which includes licences to outfit the National Football League and the National Basketball Association.

Adidas and Nike are also becoming fiercer rivals in soccer in the run-up to the 2006 World Cup in Germany. Adidas, which sold 6 million Roteiro soccer balls and 1 million pairs of PredatorPulse shoes last year, has formed a 100-member team to plan for the event.

The merger will change the equation in India too. Said Subhinder Singh, MD, Reebok: Yes, there will be some impact but its too early to comment. In India, Reebok is the No. 1 brand. With the merger, the group will come out powerful.

Andreas Gellner, Adidas India CEO refused to comment.

The company will unveil the tournament ball in September and roll out merchandise including World Cup jerseys later this year.