(Bloomberg) -- Adidas AG agreed to sell its underperforming Reebok business to Authentic Brands Group Inc. for up to 2.1 billion euros ($2.5 billion), adding another well-known name to the buyer's growing lineup of consumer companies.
The majority of the price will be paid in cash at closing, with the rest coming as deferred and contingent consideration, the companies said Thursday in a statement. The deal is expected to close in the first quarter of 2022.
Authentic Brands Chief Executive Officer Jamie Salter said in the statement that the deal is “an important milestone” in the company's growth. “We are committed to preserving Reebok's integrity, innovation and values -- including its presence in bricks and mortar.”
Authentic Brands, which filed in July for an initial public offering in the U.S., has already acquired more than 30 names, including bankrupt assets such as Barneys New York and Brooks Brothers. Reebok has been formally on the block since early this year after Adidas had tried to revive the brand's performance for more than a decade.
Adidas shares rose as much as 2.5% in Frankfurt trading after the announcement. They closed up 1.6% to 312 euros.
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At $2.5 billion, Reebok is the biggest deal that acquisitive Authentic Brands has done since its inception, Salter said in an interview on Thursday. It's also the largest transaction in his career, he said.
‘One of the Best'
“It's one of the best athletic, footwear, apparel brands in the world,” Salter said. The brand's global distribution is on par with that of Nike Inc. and its Jordan brand, he said.
Already this year, Authentic Brands has bought Eddie Bauer with Sparc Group, its joint venture with Simon Property Group. Authentic Brands, whose portfolio companies include Forever 21 and Sports Illustrated, also acquired a collection of brands from PVH Corp. that include Izod and Van Heusen.
The deal won't change Adidas' financial outlook for this year or its previously announced long-term targets, the company said. The bulk of the cash proceeds will be distributed to shareholders.
Reebok has long fascinated industry players, both as a cautionary tale and for the tantalizing potential of recapturing some of its old success. Propelled by the aerobics boom, it became a giant seemingly overnight in the 1980s and even exceeded Nike for several years in terms of U.S. sneaker sales. That momentum quickly sputtered, however, and even Adidas never managed to reignite the brand.
Sluggish Performance
Adidas acquired Reebok for $3.8 billion in 2006. When he arrived at Adidas in 2016, CEO Kasper Rorsted made a priority of fixing Reebok's long-sluggish performance. He closed underperforming stores and allowed some licensing deals to expire, cutting sales at the sporting label while slashing expenses even more.
After Reebok regained profitability by early 2019, Rorsted said he wanted to generate sales growth with new footwear lines like the CrossFit Nano and the FloatRide Run. He compared overseeing Adidas and Reebok to being like a parent who loves both his children equally.
The chance to capitalize on Reebok's deep archive of classic footwear and apparel styles -- from the clean white sneakers featuring the Union Jack to the black-and-white bullseye basketball kicks worn by Shaquille O'Neal -- could be a motivating factor for potential buyers.
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