Reebok Is To Sell Out To Ralph Lauren

Article written by: Rodrick Rainey
Posted on: June 20, 2005

Reebok International Ltd. said Monday, May 23, it will sell its Ralph Lauren Footwear subsidiary to Polo Ralph Lauren Corp. for $110 million in cash, as the shoe company focuses on its other dress and athletic brands.

Canton, Mass.-based Reebok has been manufacturing and selling Ralph Lauren-branded shoes since it signed a license agreement with Polo Ralph Lauren in 1996. A company representative declined to discuss the background of the sale, which is expected to close by next month.

For Polo Ralph Lauren, the purchase of the footwear subsidiary allows it to increase its accessory line of business as well as bring more of its brands in-house. The transaction is expected to result in marginally lower earnings this fiscal year for the lifestyle clothing maker.

Credit Suisse First Boston advised Reebok in the transaction, while UBS Investment Bank advised Polo Ralph Lauren.

Reebok doesn’t break out sales of its Ralph Lauren footwear subsidiary, lumping them together with apparel sold under the Greg Norman collection. Revenue at those units totaled $210 million last year, about 5.5% of the company’s overall sales.

Company spokeswoman Denise Kaigler said Reebok is “absolutely committed” to its Greg Norman division and wants to build that up. Kaigler added the same holds true for the Rockport, a maker of casual shoes that Reebok acquired in 1986. Rockport accounts for about 10% of Reebok’s total annual sales of $3.8 billion.

Known more for its athletic shoes, Reebok traces its root to the 1890s and one of the first pairs of track spikes. More recently, the company has signed a number of athletes to shoe deals, including NBA superstar Allen Iverson and tennis ace Venus Williams.

Sport shoe companies have often looked to “brown shoes” as casual dress and walking footwear are often called to diversify their business. Reebok rival Nike Inc. made its first-ever deal for dress shoe company Cole Haan in the 1980s.

Reebok is expected to release more details about the transaction when it reports its second-quarter earnings on July 21.