Case 3 The Adidas – Reebok Merger.pdf

The Adidas – Reebok Reebok Merger The case discusses the proposed merger of Reebok International Limited with Adidas-Salomon AG. It describes the recent trends and studies the ongoing merger in the sporting goods industry. The case presents the rationale behind the decision to merge. Finally, the case ends with a debate on whether the merger would be successful.

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The Adidas – Reebok Reebok Merger “We want to grow both brands together faster than the individual brands and of 1 course, grow faster than our competitors.” - Herbert Hainer, Chief Executive Officer, Adidas, in 2005.

“With Adidas, we are able to offer an enabled portfolio of global brands that truly 2 addresses the needs of today’s and tomorrow’s consumers.” - Paul Fireman, Chief Executive Officer, Reebok, in 2005.

“Buying a competitor achieves two objectives, both good. It removes a competitor and it increases your market share. As long as the price is right, it’s generally a good 3 move.” - Al Ries, Chairman, Ries and Ries Consulti ng in 2005. 4

“For the first time, Nike, which is actually leading the charge, has to look back over 5 their shoulder at someone who is nipping at their heels.” - Marshal Cohen, Chief Industry Analyst, NPD Group in 2005. 6

Introduction On August 03, 2005, Adidas-Salomon Adidas-Salomon AG (Adidas), Germany‟s largest sporting goods maker announced acquisition of the US-based Reebok International Limited (Reebok) for $3.8 billion. The share prices of both the companies recorded an increase on the day of the announcement of the deal. The share price of Adidas increased by 7.4% from €147.52 on August 02, 2005 to €158.45 on August 03, 2005 on the Frankfurt stock exchange, while Reebok‟s share price at the New York Stock Exchange rose to $57.14 on August 03, 2005, an increase of 30% over the August 02, 2005 share price of $43.95 (Refer Exhibit I for share price movement of the two companies). The deal would result in the union of two cutthroat competitors through a “friendly takeover”.

1

Darren Rovell, “Reebok, Adidas Have Plenty of Issues to Solve,” www.ESPN.com, August 03 2005.

2

Press Release, www.adidas-salomon.com, August 04, 2005.

3

The Merger of Titans, November 2005, Effective Effective Executive, IUP India. India.

4

Ries and Ries is a business consultancy, based in Atlanta, Georgia.

5

Laura Petrecca and Theresa Howard, “Adidas“Adidas-Reebok Merger Lets Rivals Nip at Nike‟s Heels,” www.usatoday.com, August 04, 2005











Mergers & Acquisitions, and Strategic Alliances

Exhibit I Share Price Movement of Adidas-Salomon AG, August 2005

Source: www.newsvote.bbc.co.uk www.newsvote.bbc.co.uk

Share Price Movement of Reebok International Limited August, 2005

Source: www.newsvote.bbc.co.uk www.newsvote.bbc.co.uk

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 . Analysts said that the merging companies were alike in many ways. Both the companies had a reputation of using cutting-edge technologies to produce innovative products and both had eminent brand ambassadors from the sports and entertainment worlds. Thus, the merger would help spreading the global appeal of the brands in places where they had not made a mark as individual brands. However, some analysts had doubts about the success of the merger of the companies. They cited that the merger would not generate much synergy because the individual brand identities would be maintained even after the merger. Analysts also doubted the effectiveness of the merger, as a strategy to beat Nike. They felt that the combined entity would have to work really hard to further expand its market share in the US market and globally.

Background Note Adidas The story of Adidas dates back to the year 1920 when Adolf Dassler (Adi) produced a handmade shoe fitted with black spikes. On July 01, 1924, Adi and his brother Rudolf











The Adidas – Reebok Merger

The company‟s shoes made their debut at the 1928 Olympics in Amsterdam. In 1930, the brothers purchased the factory and named it “Dassler Brothers Sports Shoe Factory.” The company introduced tennis shoes in 19 31. In the year 1935, the turnover of the company exceeded 400,000 Reichsmark 7. In 1938, a second production facility was bought in Herzogenaurach, Herzogenaurach, Germany. In 1948, the brothers decided to part ways. By August 18, 1949, Adidas was registered as a company -„Adi‟ -„Adi‟ from Adolf and „Das‟ from Dassler. Adi registered the “Three Stripes” 8 as his official logo. Rudolf set up another sporting goods company named Puma. In 1956, Adi‟s son Horst Dassler (Horst) promoted Adidas strongly during the Olympic Games at Melbourne. He also signed a licensing agreement with the Norwegian Shoe factory, located in Gjovik, Norway. I n 1959, Horst was assigned the job of establishing production facilities in France. A factory in Schweinfeld, Germany was started in the same year. In 1960, Adidas was the dominant brand at the Olympic Games held in Rome; 75% of the track and field athletes used Adidas shoes. Adidas stepped into the production of apparel and balls (soccer balls, basketball balls) in 1961 and started manufacturing track suits in 1962. The company launched its first jogging shoe called, “Achille” in 1968. The “Trefoil Logo” was introduced in 1972 (Refer Exhibit II ). The essential feature of the logo was three leaves representing the Olympic spirit, joining the three continental plates . The company used the achievements of the famous sportspersons like Muhammad Ali (boxing), Jesse Owens (athletics) and Franz Beckenbauer (soccer) for promoting the brand. In 1975, Adi became a member of the National Sporting Goods Association (NSGA)9 and the first non-American to enter the NSGA Hall of Fame. Adi passed away in 1978 and his family began to oversee the business, which by then produced 45 million pairs of shoes in a year.

Exhibit II: The Trefoil Logo of Adidas

Source: www.adidas-salomon.com 7

The Reichsmark was was the currency in Germany from 1924 till June 20, 1948. In 1948, it was replaced by the Deutsche Mark in West Germany and by the East German Mark in East Germany.

8

The Three Three Stripes were originally developed as a means to stabilize the mid-foot. mid-foot. Adidas‟ apparel and shoe designs featured three parallel stripes of the same color, and it became the official logo of the company.

9

The NSGA was founded in 1929 in New York York City, by a group of sporting goods goods












Horst died in 1987. In 1990, Bernard Tapie 10 (Tapie) bought the company for $320 million on borrowed money from Credit Lyonnais bank 11. In 1992, the bank converted the debt into equity when Tapie failed to pay the interest on the loan. Credit Lyonnais sold Adidas to Robert Louis-Dreyfus (Dreyfus) who was a friend of Tapie, in February 1993. Dreyfus became the new CEO of the company in 1994. Under the new management, Adidas stepped up its marketing efforts. In 1995, the company got itself listed on the Paris 12 and Frankfurt 13 Stock Exchanges. In 1997, Adidas entered into endorsement deals with top young sports stars like Anna Kournikova (lawn tennis), Kobe Bryant (basketball) and David Beckham (soccer) to promote its contemporary products. In the same year, Adidas acquired the French based Salomon Group14 for $1.4 billion. The company has since then been called Adidas-Salomon AG. In 1998, Adidas was included in the DAX 15 index. In March 2001, Herbert Hainer (Hainer) became the CEO and Chairman of the company. The company‟s business segments included footwear, footwea r, apparel and hardware/equipment (Refer Exhibit III for product profile of Adidas). In 2004, with 110 subsidiaries and more than 17,000 employees, the company achieved sales of € 6.478 billion and profits of € 314 million (Refer Exhibit IV for financial summary of Adidas) .

Exhibit III: Product Profile of Adidas-Salomon AG Segments

Products

Important Brands

Footwear

Footwear, ski boots and bindings, snow blades, golf shoes

Adidas, Taylormade Golf, Salomon

Apparel

Snowboard apparel, hiking, apparel, Outdoor apparel, golf apparel

Adidas, Salomon, Arc‟Treyx, Bonfire

Equipment

Winter sports including skis, snowboards, inline skates, climbing equipment, skateboard equipment, cycle components, golf equipment such as golf balls, irons and accessories and equipment such as bags and balls

Adidas, Salomon, Arc‟Treyx, Cliché, Maxfli, Taylormade Golf, Mavic

Source: www.adidas-salomon.com

10

Tapie was a minister of Urban Affairs in in the French Government and he was was well-known for rescuing bankrupt companies.

11

Credit Lyonnais is a French bank founded in 1863 by Henri Germain.

12

The Paris Stock Exchange is the second second largest stock exchange exchange in Europe. It is calledas called as “La Bourse de Paris”. It is a part of Euronext, a European Stock Exchange with subsidiaries in Belgium, France, Netherlands, Portugal and United Kingdom.

13

The Frankfurt Stock Exchange is located in Frankfurt, Germany. It is called the “Deutsche Borse” Borse” and is the largest of eight German exchanges.

14

Salomon Group founded in 1947, is a French-based worldwide leading producer of ski, golf, and winter sports equipment headquartered in Annecy, France. Its brands include Salomon, Mavic, Bonfire, Cliché, Arc‟Trex, Arc‟Trex, Taylormade, Firesole clubs, Salomon-in-line Salomon-in-line skates, etc. The group was sold to Finland-based Amer Sports Corporation for €485 €485 million in May 2005. The deal was expected to be completed by September 2005, pending an approval in several countries.














Exhibit IV: Financial Summary of Adidas Year Ended December 31 (in mn € mn € except basic earnings per share and diluted earnings per share) Particulars

2004

2003

2002

2001

2000

6,478

6,267

6,523

6,112

5,835

Net Income

314

260

229

208

182

Basic earnings per share ( €) €)

6.88

5.72

5.04

4.60

4.01

Diluted earnings per share ( €) €)

6.54

5.72

5.04

-

-

4,427

4,188

4,261

4,183

4,018

863

1,225

1,574

1,570

1,617

1,628

1,356

1,081

1,015

815

Net Sales

Total assets Long-term debt Stockholder‟s equity

Source: Annual Report 2004

Reebok The history of Reebok can be traced back to Joseph William Foster (Foster) who founded J.W.Foster and Sons in the United Kingdom in the 1895. Foster manufactured the first ever shoes with spikes to help athletes run faster. The spiked shoes had their debut on the track in the 1924 (Summer) Olympic Games. In 1958, two of Foster‟s grandsons started a company and named it “Reebok International”. Reebok was a type of African gazelle 16. In 1979, Reebok International secured distribution rights in the US, allowing it to sell its shoes in North America through Paul Fireman (Fireman). Fireman was then an associate in the outdoor sporting goods distributorship of the company. Later, the same year, Fireman formed a company called “Reebok USA Limited.” In the early 1980s, Reebok International marketed its products through a large association of independent and owned distributors. By the end of 1981, Reebok‟s sales surpassed $1.5 million. In 1982 the world‟s first athletic shoe specifically for women was launched; it was called “Freestyle.” In 1984, Reebok International and Reebok USA limited merged and Reebok International Limited was formed. In 1985, Reebok‟s sales reached $307 million. Reebok came out with its Initial Public Offering O ffering (IPO) the same year. Stock issued to the public at $6, rose to $38 by 1986. In 1986,












unit20. These acquisitions enabled Reebok to acquire distribution channels from these companies. In 1989, Reebok introduced a new ground-breaking product called the Pump shoe using the Pump® 21 Technology. In the same year, it also initiated Step Reebok, an international fitness program after conducting comprehensive biomechanical research22. Apart from being principally identified with fitness and exercise, Reebok wanted to get equally involved in sports. In 1992, it created shoes and apparel specifically for sports like baseball, football, soccer, and track and field events. In the same year, the company also signed sponsorship contracts with several renowned sportspersons like Allen Iverson (basketball) and Venus Williams (lawn tennis). Reebok developed a training program for trained exercisers and beginners in 2000 called Reebok Core Training. The program was based on physical and athletic treatment focusing on the quality of movement. Reebok also introduced an adjustable resistant Reebok Core Board used as a part of the training program to create an extremely effective and flexible workout. Reebok entered into a partnership with the National Football League 23 (NFL), USA, in December 2000 to manufacture, advertise and sell NFL‟s licen sed merchandise like on-field uniforms, sideline apparel, practice apparel, footwear and an NFL-branded apparel line from the NFL season starting 2002. The 10-year exclusive license gave Reebok the right to supply merchandise to all the 32 teams and also led to the introduction of new product categories such as Equipment, 24 and Classics 25. Reebok entered into a strategic partnership with the National Basketball Association 26 (NBA) in August 2001 for a period of 10 years. This contract gave the company exclusive rights to design, make, sell, and market certified products such as NBA-branded basketball shoes, uniforms, shooting shirts, warm-ups, authentic and replica jerseys and practice gear, headwear, T-shirts, T-shirts, fleece and other apparel for the NBA, Women‟s NB A (WNBA), and Nationa Nationall Baske Basketbal tballl Develo Developmen pmentt League League (NBDL) (NBDL) teams teams.. Reebok also entered into a partnership with Indy Racing League 27 (IRL) to be its official outfitter in February 2002. According to the deal, Reebok created ReebokIndy Racing League apparel for all IRL officials and selected teams and also sported 20

21

22

CMI‟s Boston Whaler manufactured and sold power boats for the US government and for recreational use. Pump® Technology allowed an exact fit fit with the push of a button. Later the model was was enhanced to create the model Pump 2.0 which did not require shoelaces, shoelaces, did not absorb moisture and could inflate by itself. Through biomechanical research, Reebok studied the mechanics of a living body, especially of the forces exerted by muscles and gravity on the skeletal structure. These studies helped it












its logo on race cars and other publicity programs of IRL. This made Reebok-IRL products available at all IRL events, events, via online, and through selected selected outlets 28. In January 2002, Reebok initiated a worldwide marketing drive, called the “Sounds & Rhythm of Sport”. The campaign featured Reebok sponsored NBA, NFL, and tennis players together with top performers in the music industry. In the same year, Reebok also launched a product line called “Rbk” which w hich was a collection of street footwear, apparel and accessories for young men and women who valued style. In 2004, Reebok made sales of $3.785 billion and profits of $192.4 million (Refer Exhibit V for financial summary of Reebok) . Its products were available in more than 170 countries. The major brands were Ralph Lauren, Rockport, Greg Norman (Refer Exhibit VI for product profile of Reebok).

Exhibit V: Financial Summary of Reebok Year Ended December 31 (in 000 $ except basic earnings per share and dil uted earnings per share) Particulars

2004

2003

2002

2001

2000

3,785,284

3,485,316

3,127,872

2,992,878

2,865,240

192,425

157,254

126,458

102,726

80,878

Basic earnings per share ($)

3.26

2.65

2.12

1.75

1.42

Diluted earnings per share ($)

3.05

2.43

1.97

1.66

1.40

2,440,628

1,989,742

1,860,772

1,543,173

1,463,046

460,753

353,388

353,454

351,307

358,828

1,219,956

1,033,710

884,570

719,938

607,863

Net Sales Net Income


Source: Annual Report 2004

Exhibit VI: Product Profile of Reebok International International Limited Product Lines Rbk branded footwear, apparel products and accessories for men and women

Brand

Reebok

Total Sales In 2004

US $1.65 billion International












Product Lines

Brand

Total Sales In 2004

Wovens, Play Dry Winterknit Outerwear Greg and Sweaters collection for women Norman Collection Hockey equipment and related apparel Non-Hockey related equipment such as alpine skiing and equestrian helmets. * * *

CCM, JOFA, KOHO

***

$146 million

Both Ralph Lauren and Greg Norman Norman together had sales of $209.8 million.

Source: www.reebok.com

The Sporting Goods Industry Mergers and Acquisitions (M&As) had become quite common in the sporting goods industry during the late 1990s and the early 2000s . Adidas acquired the Salomon Group for $1.4 billion in 1997. Nike acquired Converse 29 in 2003 for $305 million, while Reebok acquired The Hockey Company 30 in 2004 for $330 million. These mergers were prompted by the increasing competition and growth in the industry. The US market is the largest market for sporting goods. Experts estimate that the US sporting goods market will grow at a rate of approximately 8.9% between 2004 and 2008 to reach a value of $51 billion, forming 47.6% of the world market. It is estimated that 33% of the athletic footwear purchased by the US consumers is used for sports and fitness activities and bought on the basis of price, comfortability and fashion. In 2004, 40% of the consumers of sports apparel lay in the age group 12-24. T-shirts and running shoes were considered as the top selected categories. In 2004, sports apparel retail sales in the US were worth $38.8 billion - compared with $37 billion in 2003. Athletic footwear retail sales were $16.4 billion in 2004, compared with $15.9 billion in 2003. The key players in the sporting goods industry were Nike, Adidas and Reebok. Nike and Reebok were the two biggest players in the US athletic footwear and apparel market controlling about 36% and 12% of the t he market respectively, while Adidas had a share of about 9%. Nike controlled about 33% of the global athletic shoe market, 9.6% was controlled by Reebok, while Adidas had 15.4%. (Refer Table I for company comparison). All the three brands have been competing fiercely in the highly profitable US market since 1980. Reebok lost its position as market leader to Nike during 1989-90. Among the other players were New Balance, Fila, and Puma. P uma.

Table I: Comparative Position in 2004












Particulars

Adidas

Reebok

Nike

Employees

17,000

9,102

24,667

Major Brands

Adidas, Salomon, Mavic, Bonfire, Arc‟Teryx, Adidas Golf, Taylormade Adidas Golf, Maxfli

Reebok, Reebok Classic, Rockport, Rbk, Greg Norman Collection, The Hockey Company

Nike, Nike Golf, Converse, Cole Haan, Bauer Nike Hockey, Exeter Brands Group

Hot Product

“Intelligent” shoe with embedded chip that conforms for better support

Rapper Nelly‟s footwear and athletic line coming late 2005

Lance Armstrong‟s 10/2 apparel line introduced in July

US athletic shoe market share

8.9%

12.2%

36.3%

Global athletic shoe market share

15.4%

9.6%

33.2%

Annual Revenue

$7.9 billion

$3.8 billion

$12.3 billion

Annual Net Income

$326.5 million

$192.4 million

$1.2 billion

Current Market Capitalization

$8.9 billion

$2.6 billion

$16 billion

Source: Theresa Howard and Kelly Barry, “How Adidas and Reebok stack up against Nike,” www.usatoday.com, August 04, 2005.

The Boston (U.S.)-based New Balance was founded by William J. Riley (Riley) in 1900s. The company made shoes which helped in correcting orthopaedic foot problems. It produced Trackster in 1961 which became the first running shoe to feature a rippled sole with multiple widths. The company was bought by Jim Davis in 1972. The company sold its products under the brands New Balance, Dunham, PF Flyers, Aravon and Warrior Lacrosse. The company had sales of $1.5 billion for the year 2004. The German-based Puma was founded by Rudolf Dassler in the year 1948. The company was converted into a corporation with its stock offered on the Munich and Frankfurt stock














purchase through an arrangement of debt and equity. The deal price was equal to the latest twelve month sales of Reebok and 11.7 times its EBITDA 31. Some analysts felt that the deal was priced too high. As Uwe Weinrich, an analyst at HVB Group 32 remarked, “The price Adidas will pay for Reebok is ambitious.” 33 He added that acquisitions in the sporting goods industry rarely brought in good returns. However, Adidas expected that the merger would make it str onger and would enhance its shareholder value. Hainer said, “We see a lot of benefits in combining these two powerful companies. They both have strong identities and heritage, yet they complement each other very well” 34. Hainer also said that the deal was not strictly about dethroning Nike. The merger was subject to approval by the shareholders of Reebok, the European Union and the US Federal Trade Commission. Fireman and his wife Phyllis, who collectively owned about 17% of Reebok‟s outstanding shares, agreed to vote their shares in favor of the transaction. Adidas expected to close the transaction in the first half of 2006.

The Synergies Both the companies claimed that their missions were complementary. As Fireman remarked, “Adidas is a perfect partner for Reebok. Reebok‟s mission is to enroll global youth inclining towards the music-and-lifestyle image that it promotes through sports, music and technology. technology. This complements Adidas‟s mission to be the leading sports brand in the world, with a focus on performance and international presence.” (Refer Exhibit VII for mission statements of Adidas and Reebok).

Exhibit VII: Corporate Mission of Adidas Adidas-Salomon strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle.












Contd …

We are committed to continuously strengthening our brands and products to improve our competitive position and financial performance. In the medium term, we will extend our leading market position in Europe, expand our share of the US footwear market and be the fastest growing major sporting goods supplier in Asia and Latin America. The resulting top-line growth, together with strict cost control and working capital improvements, will drive over-proportionate earnings growth. Source: www.adidas-salomon.com

Corporate Mission Statement of Reebok Reebok is a true partner with its customers and is relentlessly committed to their success. Built on a foundation of trust, listening and innovation, we are our customers‟ most valued resource for quality products and information and the leading authority in sports and fitness. Our purpose is to ignite a passion for winning, to do the extraordinary, and to capture the customer‟s heart and mind. Reebok has a fun, energetic culture driven by the value we place on people, our greatest asset. We embrace diversity in its fullest sense. We act with integrity and operate through confident, empowered teams. With courageous leadership, we stay focused on what is most important to our customers. We have a deep-felt commitment to operate in a socially responsible way and we stand for human rights throughout the world. We are committed to excellence and innovation in everything we do. We demonstrate our excellence by setting exceptional performance standards, which we then achieve through focused perseverance and vigorous execution. Innovation












scale. It would be able to concentrate on certain key issues and gain synergies in sales, distribution and information. “I see the synergies very quickly outweighing the costs,”36 said Robin Stalker, Chief Financial Fi nancial Officer, Adidas. The companies felt that the major driving force behind the merger was greater sales growth rather than just cost savings. The annual sales of the combined group after merger was predicted to be $11.7 billion. Fireman noted that post merger, the merged entity would be in a better position to compete with Nike, which had sales of $12.3 billion in 2004 (Refer Exhibit VIII for financial summary of Nike).

Exhibit VIII: Financial Summary of Nike Year Ended May 31 (in mn $ except basic earnings per share and a nd diluted earnings per share) Particulars

Net Sales

2004

2003

2002

2001

2000

12,253.1

10,697.0

9,893.0

9,488.8

8,995.1

945.6

474.0

663.3

589.7

579.1

Basic earnings per share ($)

3.59

2.80

2.50

2.18

2.10

Diluted earnings per share ($)

3.51

2.77

2.46

2.16

2.07

7,891.6

6,821.1

6,4443.0

5,819.6

5,856.9

682.4

551.6

625.9

435.9

470.3

4,781.7

3,990.7

3,839.0

3,494.5

3,136.0

Net Income












The Adidas – Reebok Merger John-Paul O'Meara of Dresdner Kleinwort Wasserstein 37 said that the move was good for the long term and would enable Adidas to attai n “critical mass” in the U.S. market. He further added, “Reebok‟s strength is in major U .S. sports such as basketball, and not soccer, which is the strength of Adidas.” 38 With the acquisition, Reebok would gain a large presence in Europe and Asia with the help of Adidas. This would make the combined company hold about a fifth of the sports apparel market worldwide. Another advantage analysts noted was that the combined company would have more bargain bargaining ing power power in dealing dealing with suppli suppliers ers and retail retailers. ers. As Gavin Gavin Finlays Finlayson on (Finlayso (Finlayson) n) 39 of Commerzbank said, “Adidas, in conjunction with Reebok, has the t he potential to say, „We want better terms or conditions or we‟ll take our business elsewhere.” 40 The bigger size of the merged entity would enable it to negotiate prices with manufacturers, secure shelf space at retail outlets, and increase sponsorships and endorsements, especially in Asia and the US. George Whalin (Whalin), president at Retail Management Consultants 41 said, “When companies consider a merger like this, they look at big sporting goods retailers – retailers – Sports Sports Authority, Foot Locker, Dick‟s – and and try to determine the amount of space and prominence of displays they can get. Owning Reebok greatly enhances the in-store position and leverage for combined promotions. It‟s a big deal.”42 Post merger the companies would also have a stronger distribution network. Whalin pointed out that with the deal, Reebok would have access to Adidas‟ globally spread distribution network and Adidas would have a stronger distribution network in North America. Adidas and Reebok would be able to accelerate development of innovative products and product lines in footwear, apparel, and hardware by exploiting R&D expertise together. Adidas had developed state-of-the-art technologies such as Adidas_1 43, A3®44 and ClimaCool 45. Reebok, on the other hand, had product innovations including the Pump 2.0 46 and DMX47. This portfolio of innovative products was expected to increase consumer demand across all brands.












As far as sports sponsorships were concerned, analysts felt that the deal would allow Adidas to have access to Reebok‟s licen ses in the NFL and NBA in the US, as it had a substantial share in the US market and had supply deals with all the major sports leagues. As Hainer remarked, “This portfolio will present us in all the major sport categories around the world. Reebok is extremely strong in the American sports like NFL, NBA - and Adidas is very strong in the FIFA World Cup, the Olympic Games and the European Champions League. They are strong in America; we are strong in Asia and Europe.” 48 (Refer Exhibit IX for sponsorship deals).

Exhibit IX: Top Sponsorship Deals of Adidas, Reebok and Nike Particulars

Adidas And Reebok

Nike

Sports

Football, Basketball, Cricket, Soccer, Athletics, Hockey, Golf, Tennis, Rugby

Soccer, Basketball, Golf, Athletics, Cycling

Confederations

UEFA Champions LeagueTM, NFL, NBA, NHL, MLB, MLS, more more than 20 Olympic Committees, New Zealand All Blacks, World XI Team

Brazil Soccer, Manchester United (Soccer)

Teams

Real Madrid, Milan AC, Bayern Munich, Liverpool FC, Australian National Cricket Team, New York Yankees

St. Louis Cardinals 1 B, San Diego Chargers, Chicago Bears, Minnesota Twins, Pittsburg Stealers

Events

2006 FIFA World CupTM, Beijing 2008














Particulars

Endorsements (Entertainment)

Adidas And Reebok

Nike

Missy Elliott (rapper) Christina Ricci (actress) Lucy Liu (actress) Mary J. Blige (singer) Eve (rapper) Jay-Z (rapper) 50 Cent (rapper) Nelly Furtado (singer)

Source: Compiled from various sources

Adidas was being promoted by celebrities like David Beckham (Soccer player), Andre Agassi (tennis player), and Missy Elliott (rapper). Reebok used Yao Ming (basketball player), Allen Iverson (basketball player), Jay Z (rapper), 50 Cent (rapper) and Nelly Furtado (singer) to revitalize its youth appeal. According to analysts, Adidas would benefit hugely from using Reebok endorser endorser Yao Ming to further expand its business business in












everybody knows what the Swoosh is. It's a tough problem they face and I don't see how Reebok helps Adidas with that problem” 52, said Jack Trout, a veteran sports and marketing consultant. However, marketing guru, Al Ries, (Ries and Ries Consulting) felt that Adidas would in fact get strong leverage with Reebok. He remarked, “Short term, there are going to be problems putting the two brands together. But in the long term, Adidas will be strengthened.” 53

Exhibit X: The Swoosh Logo of Nike












Contd...

Reebok Logo

Source: Google Images/ www.fitness-equipment.uk.com

The Track Ahead












is driven by US expansion plans and of fer of fer few synergies.” 59 “If they really try to operate the two brands the same way they have been – competing with each other – other – there‟s not a heck of a lot of synergy there,” said Matt Powell, senior contributing editor at Sports Executive weekly. 60 Experts said that the two companies were adopting a defensive strategy by joining together. As Finlayson said, “The message Adidas is making is „We can‟t cut it alone in the US‟,” noting that there would be little by means of production synergies. 61 There are possibilities of mergers happening in the sporting goods industry in the future considering the merger between Adidas and Reebok. Analysts remarked that it was improbable that Nike would launch a rival bid for Reebok. However, experts did not rule out the possibility that Nike could instead be lured to acquire another German rival, Puma.












Additional Readings & References: References: 1.

Adidas agrees to buy rival Reebok , www.news.bbc.co.uk, August 11, 2005.

2.

Reuters „Sales growth, not cost cut, united Adidas, www.economictimes. indiatimes.com, August 11, 2005.

3.

After Reebok-Adidas www.usatoday.com, August 09, 2005.

4.

Darren Rovell, Reebok Adidas have plenty of issues to solve , www.ESPN.com, August 03, 2005.

5.

Press Release, Adidas-Salomon Adidas-Salomon to combine with Reebok and create €9 billion footprint in global athletic footwear, apparel and hardware markets, www.adidas-salomon.com, August 03, 2005.

6.

Press Release, “Reebok Transaction and First Half Year Results 2005 Financial Results Presentation” Presentation”, www.adidas-salomon.com, August 03, 2005.

deal,

US

shoemaking

hangs

by

Reebok‟ , a

lace ,














21.

Two shoes firms merge while a third thrives , www.billwallacesports.com

22.

Associated Press, Sportswear www.wvtsam950.com

23.

Jennifer King, Adidas + Reebok = Foot stompin‟ new market share, www.ruggedelegantliving.com, August 03, 2005.

24.

Parija Bhatnagar, Cheaper sneakers on the way? www.money.cnn.com, August 04, 2005.

maker

Adidas

to

buy

Reebok ,

Case 3 The Adidas – Reebok Merger.pdf

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