A group of investors are going to bid around 1.7 billion euros ($2.2 billion) for Adidas AG’s Reebok unit, based in Canton, Massachusetts.
Funds affiliated with the government of Abu Dhabi and a Hong Kong based private-equity investor, Jynwel Capital, are in talks to make Adidas an offer very soon, according to the Wall Street Journal.
In July Adidas reduced its full-year profit forecast. The company has seen increased competition from both Nike Inc. and Under Armour Inc. It has also reported somewhat lackluster results in golf gear sales. It cut its annual net profit forecast to about 650 million euros, significantly lower than previous guidance for 830-930 million euros.
In addition, a weakening ruble has had an affect on earnings, with Russia and its neighboring countries accounting for over 13 percent of net sales.
It has been a difficult year for the German giant and it has seen its share of the US market continue to decline.
In 2006 the German company acquired Reebok for $3.8 billion in an effort for its footwear and sporting-apparel to directly compete with Nike in the US. The division now makes up almost 25 percent of net revenue.
Reebok Concept Store, located in the Morumbi Concept Hall.
It’s been argued that Reebok would have a better future if it were to be operated independently.
The U.S. makes up around 40% of the global sneaker market.
SportsOneSource analyst Matt Powell told the WSJ:
“There’s always been this complaint around Adidas that it didn’t make products that were appropriate for the U.S. market, and instead tried to impose a world-wide product line on the U.S.,”
In 2012 Nike replaced Reebok as the National Football League’s apparel supplier, which caused a significant drop in sales. Adidas has dropped by more than 41 percent in trading this year and is the worst-performing stock in the German benchmark 30-stock DAX Index.
It is not yet clear which specific Abu Dhabi fund is going to be participating in the bid. The group of investors will continue building on Reebok’s current strategy, inject more capital to open new stores, and spend more on marketing. It will be keeping current Reebok executives, according to the WSJ.
