Adidas Buys Out Reebok In Attempt To Dominate Market

Article written by: Rodrick Rainey
Posted on: August 5, 2005

Adidas wants Reebok to help it double-team the “big man” on the court in the $57 billion-a-year U.S. sports footwear and apparel market.

The Germany-based global power announced on Wednesday a $3.8 billion deal to buy Canton, Mass.-based Reebok, uniting two of the world’s top sports companies and creating a much stronger challenge to Nike, particularly on the global giant’s home turf: the prime North American market that accounts for about half of the category’s sales worldwide. (Chart: How Adidas and Reebok stack up against rival Nike)

“We will expand our geographic reach, particularly in North America, and create a footwear, apparel and hardware offering that addresses a broader spectrum of consumers and demographics,” Adidas CEO Herbert Hainer said in a statement.

The union would mean that for the first time in more than a decade, industry leader Nike faces a near equal. Reebok and Adidas combined had 2004 global sales of $12 billion ($8 billion from Adidas, $4 billion from Reebok) vs. Nike’s $14 billion in its latest fiscal year, ended May 31.

“For the first time, Nike, which is actually leading the charge, has to look back over their shoulder at someone who is nipping at their heels,” said Marshal Cohen, chief industry analyst at researcher NPD Group.

The Adidas-Reebok combination would have bulked-up clout with suppliers, in securing shelf space at retail outlets, in bidding for sponsorships and endorsements, and in demanding discounts on its mass-media advertising buys.

The deal also would fill holes in each company’s shoe portfolio, said Neil Stern, a senior partner at McMillan/Doolittle Retail Consultants. Reebok is strong in tennis, fitness and basketball, he said, while Adidas has a grip on soccer and team sports. The company is expected to continue its separate brand names.