The cash transaction, expected to close in the first quarter, resets the active game on several fronts, freeing Adidas to focus on its much bigger flagship business while giving licensing powerhouse ABG a big boost in the hot category, and just before its planned IPO this summer.
Adidas was toying with the idea of selling the struggling Reebok last year and made it official in February, putting the company on the block just before it unveiled its “Own the Game” strategy to boost sales and profitability.
The implication was that Adidas needed — or at least wanted to — drop Reebok from the team if it was to win. But as Adidas vies for focus, Salter, chairman and chief executive office of ABG, is playing a different and much broader game and, for now, winning in his own way.
ABG has become a voracious acquirer scooping up rights to celebrity names from Marilyn Monroe to Shaquille O’Neal, brands such as Spyder and Airwalk and retailers Forever 21, Brooks Brothers, and Barneys New York along with many others.
Reebok will take the business to another level again.
“We’ve had our sights set on Reebok for many years, and we’re excited to finally bring this iconic brand into the fold,” Salter said. “Reebok not only holds a special place in the minds and hearts of consumers around the world, but the brand also has expansive global distribution. Adidas has been an incredible steward of the Reebok brand, and we look forward to working with the Reebok team to continue their great work and further its position as one of the world’s leading consumer brands.”
Reebok operates in 80 countries and gets about 70 percent of its business from outside the U.S and Canada.
ABG said it “plans to employ its core playbook, connecting strong brands with best-in-class licensees and a network of partners that seek to optimize value in the marketplace. The brand’s world headquarters will remain in Boston and ABG will work closely with Adidas, Reebok’s President Matt O’Toole, and the entire Reebok team to transition the brand to ABG’s platform.” Salter and crew plan to maintain the brand’s global footprint across retail, wholesale, and e-commerce.
While the brand lags behind leaders Nike and Adidas, it holds a special place in the hearts of many. O’Neal said, “As a longtime partner of Reebok and an owner of ABG, it’s a dream come true to welcome this legendary brand to the family.”
The basketball star has suggested before this was a possibility.
In 2019, O’Neal told an interviewer, “I would love to buy Reebok,” well before the brand was known to be for sale. And now — 29 years after O’Neal was signed to endorse Reebok’s “Shaq Attaq” — he’s realized that dream, at least in some fashion.
Reebok will also have some new, especially financially savvy types, on the team going forward. ABG said its private equity backers BlackRock, General Atlantic, and Leonard Green & Partners “played an instrumental role in this partnership.”
Kasper Rorsted, Adidas’ CEO, said: “Reebok has been a valued part of Adidas, and we are grateful for the contributions the brand and the team behind it have made to our company. With this change in ownership, we believe the Reebok brand will be well-positioned for long-term success. As for Adidas, we will continue to focus our efforts on executing our ‘Own the Game’ strategy that will enable us to grow in an attractive industry, gain market share, and create sustainable value for all of our stakeholders.”
Adidas acquired Reebok in 2006 for $3.8 billion, which at the time included the Rockport, CCM Hockey, and Greg Norman brands. Adidas later offloaded those brands.
Reebok has long been overshadowed by its parent company and has been a perennial underperformer even though results have improved recently. Reebok’s sales bounded 94 percent in the second quarter versus a year ago, and 13 percent above 2019 levels.
While Adidas clearly wants to focus on its main brand, it is also selling into what has become a very hot deal market, where investors of all sorts are looking anew at consumer companies and beyond the pandemic.
Companies are increasingly taking in lower interest rates and government stimulus, relatively strong consumer spending, and business optimism that is transcending the delta variant, and breaking away to make their move.
Joining ABG in their rush to the public market is a host of other brands and fashion companies. Rent the Runway and Warby Parker has both said they’re taking the plunge, while Allbirds and Fabletics are rumored to be. Ermenegildo Zegna Group is going public via a SPAC deal. And Foot Locker Inc. is shelling out $1.1 billion to bring two retailers, Atmos and WSS, into the fold.
Other players in the world of sports are also making their move.
Sports licensing giant and quick-turn jersey artist Fanatics scored an $18 billion valuation this month, raising more money from Jay Z, Major League Baseball, and others as it inched toward a broad focus that could also include sports betting. The company has said it could go public eventually.
Across the board, brands are doubling down on their direct-to-consumer plans, building on the e-commerce gains made during coronavirus lockdowns and building stronger relationships with the end consumer.
If the pandemic forced fashion to take a kind of half-time break to rework its strategy, the second half is about to start. And Reebok seems to be coming off the bench — with a whole different plan of attack.