Sportswear brand Adidas shares rose by 6% after reports and intense speculation that potential investors were considering putting in a bid on its Reebok brand.
The Reebok brand is estimated to be worth $2.2 billion (£1.4 bn).
Offers are rumoured to be coming from Hong Kong based investment firm Jynwel Capital and Abu Dhabi government affiliated funds.
The Sports giant Adidas bought Reebok for $3.8bn (£2.1bn) in order to diminish competitive rivalry between the two companies. Unfortunately both Adidas and Reebok have recently reported weak trading. Despite the two competitors joining forces they were no matches for Nike. Reebok lost its NFL contract to Nike as their official uniform supplier. Adidas also lost out to the brand as Nike won the battle to be the World Cup’s official sponsor. This resulted in Adidas re evaluating their growth outlook for the year.
The German company Adidas, have announced plans to try and return as much as £1.bn to shareholders over the next three years.
Retail Analyst at The Economist Intelligence Unit, Jon Copestake gave his commentary on the Adidas/Reebok development.
“While the deal may appease Adidas investors looking for some quick and easy liquidity, it would be something of an admittance in defeat if Adidas’s global and North American strategy. The US $2.2bn being quoted lies some way short of the US $3.8bn paid by Adidas in 2006. Reebok is also one of the few brands enjoying some success for Adidas lately, with the five consecutive quarters of growth achieved by Reebok coming in stark contrast to the underperformance of other divisions.
The failure to secure NHL and NFL deals will definitely weigh on Reebok’s strategic value given that Adidas had hoped it would provide a much firmer springboard into North America. However, despite the short term gain, the sale will effectively be ending Adidas’s interest in a number of fitness and health markets that have been growing quickly in North America. This could have longer term implications for the German firm.”