International Business

Individual Assignment

An Analysis
Of
Adidas-Reebok Story

Name: Sankeerth B S
Roll No: 16043
Section A

Batch: 2016-18

Submitted on: 8th Feb 2016

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Table of Contents
Table of Contents.............................................................................................................................2

Report Overview:.............................................................................................................................3

ADIDAS..........................................................................................................................................3

REEBOK.........................................................................................................................................4

THE MERGER................................................................................................................................6

Is Adidas and Reebok merger working?..........................................................................................7

References........................................................................................................................................9

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Report Overview:

This report is about the story between the worlds second and third largest sporting shoe
companies, which is ADIDAS and REEBOK. Adidas headquarter is in Herzogenaurach,
Germany, and Reeboks headquarter is in Canton, Massachusetts, United States. Even though
these two leading companies were well advanced and well-known companies, the only common
competitor both the companies faced is NIKE, which is a U.S based company. Nike has been in
the market leader position since many years in the industry with 31% market share, followed by
Adidas and Reebok with 16% and 6% respectively. The main goal of both the companies is to
put behind Nike behind them in the Sporting shoes market. Even though with the good portfolio
of Adidas and Reebok, the Nikes presence was much better worldwide. Just in U.S, it was
reported that the annual sales of Adidas and Reebok combined comes to $12.3 billion where
Nikes alone had an annual sales of $13.7 billion. This seems to be very tough with Adidas and
Reebok, and it was also found that Reebok also had few problems regarding its brand identity
with respect to 3 games, which will be discussed later. So these two companies planned for
merging together to beat its only competitor NIKE. Finally with all the legal regularities done
within the companies of two different countries, the merged on 12th of December 2005.

About the Company.

ADIDAS

Adidas is a German Multinational Corporation headquartered in Herzogenaurach, Germany.

They design and manufactures sport equipment, clothing, sport shoes and accessories and they

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are known for the largest sportswear manufacturer in the Europe and also second biggest in the
world after Nike. The founder of Adidas, Adolf Dassler started in July 1924, they actually started
the company by producing the football shoes and then as the time progress slowly moved to
different sports. The current CEO of the company is Kasper Rorsted. Their financials goes as
they have a revenue of 16.92 billion and profits of 1.1 billion as of 2015.
Their association with football is phenomenon, they supply the kits for many of the
international teams, clubs and referees for the best countries and the best leagues in the world.
They sponsored 2006 FIFA World cup, main sponsor for clubs like Bayern Munich, Reak
Madrid, Chelsea, Manchester United and national teams like Argentina, Spain, Japan, Germany
and Adidas also several players like Lionel Messi, Thomas Muller, David Beckham, Luis Suarez,
Mesut Ozil etc. They are also Official sponsor of UEFA Champions League. In this way they are
into Tennis, Golf, Cricket, Basketball, Rugby, and what not. Their subsidiaries include Reebok,
Runtastic, Taylor-Made, Ashworth, and Matix. Adidas was already a market leader in the
European segment whereas their targeted market in the United States, they lacked because of
Nike. Nike was also a well-established company not only in the United States, but all over the
World. But when the things were not going right with Adidas, it was found that Adidass shares
fell more than 8% in the North America. The CEO Kasper Rorsted found that the growth would
slow down the next year as well (in North America). That is when Adidas and Reebok planned to
merge together so that they can compete with the market leader Nike. Which was one of the
successful merger of two big companies in the world.

REEBOK

Reebok is global athletic footwear company, currently operating as a subsidiary of Adidas,

headquartered in Canton, Massachusetts, United States. Reebok was founded in the year 1958 by
Joe and Jeff Foster in Bolton, Manchester, England. Paul Harrington, who joined Reebok in the
year 1994 as a senior Vice president of operations and supply chain officer is named as President
and CEO of the company in January 2006. Their financials for the year 2004 before the merger

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with Adidas included the revenue of $3,785.3 million with the profits of $192.4 million. Their
products includes fitness equipment, workout clothing, shoes, training equipment, and
accessories. They also announced the partnership agreement with CrossFit in 2010. Reeboks sub
brands are divided according their sport activities like Reebok freestyle, Reebok pump, Reebok
zig, Reebok Classic, CrossFit etc. They are also official sponsors for National Football League
(NFL), Canadian Football League (CFL), Major league Baseball (MLB) and many other major
sport leagues in the world.

Reebok was doing well in terms of their business until, they were overcome by one of the
competitors, who was none other than Nike. Even though they had high endorsements with many
of the famous soccer stars like Thierry Henry, Andriy Shcevchenko, Ryan Giggs, boxing stars
like Jeff Fenech, Floyd Mayweather, Conor Benn and in cricket with former Indian national
cricket team captain, Mahindra Singh Dhoni. Their endorsement with Jay Z (rapper) was a huge
hit because of the S. Carter sneakers which was the brands most famous and fastest selling shoes
of all time. But Reebok went on loss after their agreement and relationship with three of the
major sports were resigned, which were football (American), basketball and hockey.

Football. A ten year contract was agreed with Reebok with National Football League (NFL) for
their uniforms and hoodies which was expired in 2011. But during the contract extension period,
the NFL refused the offer to Reebok instead they offered the contract to Nike. This was very
much critical for the Reeboks business in North America, because two-thirds of their brand
revenue or goodwill was coming from NFL itself. Which was a very bad hit the company.
Basketball. In 2001 Reebok negotiated a ten year contract with National Basketball Association
(NBA) for a $400 million deal, in which the deal was passed on to Adidas later on in 2006.
Because the basketball professionals thought the Adidas Companys stripes would do better in
the European and Asian countries. Hockey. Reebok had a virtual grip on National Hockey
League (NHL) until a Canadian sports gear maker called CCM bought it in 2004. Ut still they
had a role with NHL along with Adidas, Nike and CCM their current deal has expired in 2016.
With this Reebok finally decided to merge with Adidas in 2005.

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THE MERGER
The merger and acquisition has been a very successful in the present rising competition and
the current industrial growth. We can see, in 1997, Adidas acquired Salomon group for $1.4
billion, Nike acquired Converse for $305 million in 2003 and Reebok acquired Hockey
Company in 2004 for $330 million. So, Merger and Acquisition in this industry has been a very
successful event so far. Nike surpassed Adidas in the football shoe segment not only in Europe
but elsewhere, and was the market leader in the U.S market.

Source: Athletic shoe industry, slide share

According to figures by the Sporting Goods Manufacturers Association International

(SGMAL), they found Nike was the market leader with 31% market share followed by Adidas
with 16.9%, Reebok with 6% and Puma with 7%market share in the U.S. Nike became the
famous brand among the consumers because of its colours, fashion, combinations etc. whereas
Adidas and Reebok focused only on Sport and lifestyle.There was a fourth competitor in the list
who is Puma. With these top four brands, the competition was huge from Nike and Puma.

This is when Adidas and Reebok started in the process of merger. Adidas Chairman and CEO
says, this is a new chapter in the history of our industry, and that they were delighted to merge
with a company like Reebok, this will be th entry for a new range and variety of products to the
world and a stronger presence in the world of sports, leagues and events. CEO also confirms that
after the acquisition, the brands will be kept separate, all their operations, supply chain
everything will be separate, the respective companies would continue sell their products under

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their brand names and labels itself. On 12th December 2005 Adidas finally acquired Reebok on a
3.1 billion deal. The main aim of the merger is increase Adidass market share in U.S industry.
And the biggest challenge they faced is cultural differences that is to bring the German culture of
Adidas in engineering, control, supply chain and production to Reeboks U.S culture. The
merged companies will be having more than 20% of the US market in their hands. Under the
terms and conditions it was found that Adidas would pay 59 per share for all the Reeboks
shareholders with a premium of 34.2%.

Is Adidas and Reebok merger working?

After the acquisition it is found that the merger was a successful merger & acquisition, the
merged company has improved a lot in its profits and revenues. After the announcement of the
merger the company enjoyed the increase of 30% in the net profits. After the acquisition
following reports were seen.
Amt in millions

Particulars Before merger After merger

Net income 13 21
Sales (2006) 230 240
Yearly Earnings 483 551
Source: Adidas reebok merger strategy

After this Reebok also gained its respect back in the market, they were the official Euro
soccer championship in 2008 in Beijing Olympics, China. Reeboks backlog order was down by
8%. But still it was found that Nike was way ahead of these two companies. In 2008 Nike
announced their completed acquisition of Umbro Plc. This takeover was a successful in terms of
the football market Umbro had in the European countries. Nikes CEO Mark Parker reported that
their revenue will be increased to $23 billion by 2011. So the question is, whether Nike can do
better than the merged companies of Adidas and Reebok or else spoil the plans and can Adidas
become the market leader in the U.S? This answer is to be remained for future. But the merger

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between the worlds two best shoe manufacturing companies, Adidas and Reebok has been one
of the successful Merger & Acquisition in the world.

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References
[1] [Online]. Available: http://www.casestudyinc.com/adidas-reebok-merger-case-study.
[3] [Online]. Available: https://www.theguardian.com/business/2005/aug/03/money1.
[4] [Online]. Available: cnews.com/id/8805430/ns/business-world_business/t/sportswear-maker-

adidas-buy-reebok/#.WIznLfl9601.
[5] [Online]. Available: http://fortune.com/2016/11/03/adidas-ceo-reebok/.
[6] [Online]. Available: https://en.wikipedia.org/wiki/Adidas.
[7] [Online]. Available: https://en.wikipedia.org/wiki/Reebok.

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