There have been many mergers and acquisitions in the sports goods industry in the recent years which has been mainly driven by rising competition and industrial. Adidas acquired the Salomon Group in 1997 for $1.4 billion, Nike acquired Converse in 2000 for $305 million and Reebok acquired The Hockey Company in 2004.
Adidas and Reebok ?Two mega brands In August 2005, Adidas Salomon announced its plans to acquire Reebok for an estimated value of ?3.1 billion ($3.78 billion). In 2005, Adidas had a market capitalization of about $8.4 billion and net income of $423 million on sales of$8.1 billion. Reebok reported sales of about $4 billion and net income of $209 million on sales in 2005. Adidas and and Reebok Reebok competed competed for the second second and the third positions positions after after Nike, the the market leader of sporting goods in U.S. The purpose of the merger was to compete with Nike.
Competition Nike was the market leader of sporting shoes industry in U.S. and was ahead of Adidas in the soccer shoe segment in the European market. According to the statistics by the Sporting Goods Manufacturers Association International, Nike had about 36%, Reebok 12.2%, Adidas 8.9% market share in the U.S. sports shoes market. Adidas held the second position as the sporting goods manufacturer globally but it was not able to establish itself in the U.S. market. Adidas as a brand was perceived to have products that offered comfort whereas Reebok was perceived as a stylish brand. Nike offered both comfort and added a fashion status in its products. Adidas emphasized on sport whereas Reebok on lifestyle and fashion quotient of the product. Both the companies realized that their chances to compete against Nike were much better if they were together. Adidas was was also facing facing steady steady competition competition from Puma, Puma, the No. 4 sporting goods brand brand in the U.S. Puma had disclosed its future expansion plans into new sportswear segments and increase in the market holding in the sportswear industries. For the merger to prove a success the challenge faced by both the companies was to bring the different cultures of the two companies together i.e. Adidas's German culture of control, production and engineering and Reebok's U.S marketing culture.
The ADDY and RBK Merger ?Impossible is Nothing Adidas completed completed its acquisitio acquisition n of Reebok Reebok International International Ltd on January January 31, 2006. 2006. This merger provided the Adidas Group with increase in the market share globally and in the U.S in the athletic footwear and apparel markets. Adidas's presence after the merger increased to ?9.5 billion ($11.8 billion) globally. The merger of Adidas and Reebok marked a whole new chapter in the history of the Adidas Group. By the merger of the two of the most notable and well known brands in the global sporting goods industry, the new company will enjoy a stronger presence in the global markets, well defined brand identities, and a strong competitive worldwide platform. The brands of Adidas and Reebok were kept separate because each brand had its own identity and value. The company continued to sell products under the respective brand names and labels.
Is the Adidas Reebok merger working? Adidas plus Reebok is equal to better competition with giant Nike
Nike was the leader in U.S, and had about 36% market share in the athletic-footwear market as compared with Adidas 8.9% and Reebok with 12.2%. So they decided to grow both brands together, so that they can grow faster than there competitor. . In 2006, Adidas acquired Reebok in a US $3.1 billion deal. Reebok was seen as a stylish or hip brand whereas Adidas was perceived to have good quality products. Reebok is strong in tennis, fitness and basketball, while Adidas has a grip on soccer and team sports. The merger was aimed at helping Adidas increase its share in the U.S. market and better compete with market leader Nike Inc. and fourth ranked Puma AG. For a successful merger, the challenge was to integrate Adidas's German culture of control, engineering, and production and Reebok's U.S. marketing-driven culture. Clearly the chances of competing against Nike were for better together than separately. The Reebok acquisition was seen as a key factor in growing the Adidas brand in developing and fashion- oriented markets of Asia like China, Korea, and Malaysia. Moreover, Reebok already had marketing tie-ups in China and Adidas did not have to cover all China segments. Adidas and Reebok claimed that the merger was decided upon because of the realization that their individual (company) goals would be best accomplished by joining instead of competing. Nike International Inc. (Nike) was the common competitor for both Reebok and Adidas.
Adidas-Fourth Quarter 2007 performance There is an advantage to a retailer to do business with a combined company because of the other businesses the company is in, it helps in lowering costs. Adidas reported its fourth quarter results for 2007(October-December, 2007). The results were helped by lower purchasing costs resulting from its acquisition of Reebok and improved sales. In U.S, Nike spent $85 million on advertising, while Adidas spent $47; Reebok $26. The deal increase those totals. In this way they increased there strength by combining in media buying. Its net income rose to ?21 million from ?13 million a year earlier. Sales increased to ?2.4 billion compared with nearly ?2.3 billion in 2006. In 2007, total yearly earnings were ?551 million, up 14 percent from ?483 million in 2006. Sales for the year rose marginally to ?10.3 billion from ?10 billion in 2006.
Adidas vs. Reebok unit performance Both the companies estimate savings from the merger of $120 million within the first three years from marketing, distribution and operations savings and layoffs. The Adidas brand had sales worth ?7.1 billion while Reebok had sales worth ?2.3 billion. Last year, in 2006 the Adidas brand had sales worth ?6.6 billion to Reebok's ?2.5 billion. The share prices of both the companies recorded an increase on the day of the announcement of the deal. Order backlog of brand Adidas was excellent up 17 percent which can be partly attributed to the Euro 2008 soccer championship and Beijing Olympics this year. However, Reebok's order backlog was down 8 percent. Nike reported worldwide futures orders for athletic footwear and apparel totaling $6.5 billion, 13 percent higher than such orders reported for the same period last year.
Nike was a preferred brand because of its fashion status, colors, and combinations. Although Adidas was perceived to have good quality products that offered comfort and Reebok was perceived as a 'cool' brand, Nike was perceived as having both 'hipness' and quality. Meanwhile, Nike announced (Mar 3,2008) that it has completed its acquisition of Umbro Plc. Nike's Umbro takeover is an effort to consolidate its position in the football market where Adidas has performed well. Last year, Nike's CEO Mark Parker Outlined a brave plan to increase the company's business to $23 billion in revenue by 2011. Will Nike do it or will the Adidas-Reebok merger spoil its plans, still remains to be seen.
Reebok and Adidas: A Good Fit •
Their merger could put the Company on the fast track. Then again, Nike may still prove to agile to catch.Then they could promise to be a good competitor for Nike and coult being its leadership in danger.
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The merger of Reebok International (RBK ) and Adidas-Salomon AG (ADDYY ), announced Aug. 3 2005 by the companies was the perfect match to lead the global sporting goods. A combination of Reebok International (RBK ) and Adidas-Salomon AG (ADDYY ), announced Aug. 3 by the two companies, is one of those mergers with which it's difficult to find fault.
Market share •
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In 2004 (According to the Sporting Goods Manufacturers Association International) Nike was the market leader in the sports goods industrty . In 2004, it had about 36% market share in the athletic-footwear market Adidas has 8.9% of the U.S. market and Reebok 12.2%. The U.S. ranks as the world's biggest athletic-shoe market, accounting for half the $33 billion spent globally each year on athletic shoes. US is laeding market in the sports shoes industry and accounts all most half of the dollar 33 billion of the global market in a sport shoes.
Later Merger SURGING STOCK-After the merger of Adidas and Reebok was announced, Reebok closed up $13.19, or 30%, to $57.14. Adidas shares increased up 7%, to $192.96, in Frankfurt. HIP-HOP NATION- Both Adidas and Reebok after the merger reported a annual saving of dollar 150 million from their combined operations but for the Adidas to prove a successful
merger with Reebok was management of its portfolio and execution of new products and marketing plan and to compliment each other as a brand.
Transaction Details Germany's Adidas-Salomon agreed to buy Reebok International for 3.1 billion euros ($3.78 billion), or $59 a share -- a 34% premium over the $43.95 at which its shares closed the day before the announcement. Adidas has a market capitalization of about $8.4 billion, and reported net income of $423 million last year on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion. The main market for Adidas was the upper end performance shoes while Reebok focused on middle price segment of the market. Reebok focused basically on its appreal licencing with the NFL & the NBA. whereas Adidas emphasized to sell high performance shoes in those sports where Reebok's brand value was low. SINGING PRAISES:- Both Reebok and Adidas were two mega brands of the global sports wear industry, each having its own strength. The motive of motive of these two companies were to cosine their strengths & be a steady competitors to Nike While Reebok and Adidas concentrated their product lives & marketing around, Nike emphasized on hip hop world. Nike to increase its market share also parented with various design & top end record for special edition in its air force 1 &dunks lines.
Problems Adidas and Reebok merge was an ideal merger but for the merger to prove a success both the companies had to cosine their cultural differences ie. Adidas's German culture and Reebok's US culture. Adidas German culture of control, production & engineering & Reebok US marketing driven culture will adversely affect the market of the merged company as Nike is already too ahead in the race of leading the market in the US. Adidas faced financial differences in 1990's. it nearly went bankrupt before French financing Robert louis dreyfus recurred it and revived it to be a global giant. He restructures the company and made great changes in Adidas marketing campaigns. Reebok was also facing tough financial problems in 1990's. Nike seeing an opportunities went ahead to lead the the US market with the ? performance driven culture ?.
Post merger performance 7th mar ,2007 -Adidas Group's motto is “Impossible Is Nothing.” But since the No. 2 sporting-goods maker announced in August, 2005, that it would snap up rival Reebok for $3.8 billion to gain a firmer footing in the U.S. and challenge market leader Nike (NKE), the company has yet to prove that the combo will work. True to its mantra, however, Adidas says it's racing flat-out to make its tie-up with Reebok a winner. The company has closed factories in Indonesia and is repositioning the Reebok brand to widen its appeal. “Our focus this year will be on getting Reebok back onto a growth
track,” Adidas Chief Executive Herbert Hainer said in a statement. “It's going to take time, but we're moving in the right direction.” As part of that move, the company is ramping up its sales and marketing efforts. It's reducing reliance on low-traffic, shopping-mall-based outlets and placing Reebok apparel and footwear in higher-end department stores and larger sporting-goods ventures. Adidas has also enlisted star NFL quarterback and Super Bowl MVP Peyton Manning, actress Scarlett Johansson, and other famous faces to help launch a series of new products planned in the second quarter. The company says it expects these efforts to increase sales of the Reebok brand this year in the “low-single-digit” range. Adidas expects its gross margin in 2007 to be between 45% and 47%, thanks to “improvements in all three brand segments.” For the group, the company expects sales in 2007 to grow in the “mid-single-digit” range
