Adidas Plans to Sell Reebok: Is Shaq the Most Likely Buyer?
Adidas is reportedly looking to unload Reebok by March 2021, according to Germany’s Manager Magazine. Adidas acquired Reebok in 2005 for $3.8 billion, a move that helped the second largest sports brand in the world strengthen its presence in the U.S. market.
Potential suitors: With a significant position in footwear and apparel, and influential sponsorships and endorsements including UFC, Crossfit and JJ Watt of the Texans, Reebok could be an attractive purchase for a number of acquirers, according to Cowen analyst John Kernan.
VF Corporation & Anta Sports: Both of these brands were named as interested parties in the Manager Magazine report. Cowen says VF Corp has the capital to fund a major deal due to its normalized run-rate of free-cash-flow plus the incremental debt.
VFC’s last significant purchase was Williamson-Dickie for $820 million in 2017. The last time VFC dished out more than $1 billion for a brand was in 2011, when it bought Timberland for $2.3 billion.
Shaquille O’Neal: Cowen points out that Shaq “brings a unique perspective and has the capital to invest.” The NBA legend recently teamed up with former Walt Disney executives and one of Martin Luther King Jr.’s sons to form Forest Road Acquisitions, a SPAC designed to make acquisitions in the media and technology business. Reebok might not fit the target list for his SPAC, but Shaq expressed interest in buying Reebok last year. “Well, [Authentic Brands Group, one of the companies] I’m involved in, we just bought Sports Illustrated but I would love to purchase Reebok, ” O’Neal told CNBC in June 2019. Shaq first signed a multi-year deal worth $15 million with Reebok in 1992.
Why it makes sense for Adidas: According to Cowen, “A sale would raise Adidas' margin profile, marginally benefit EPS at the high end of our transaction comps, and create potential for €1.2B to €1.7B+ cash inflow.” Despite some big name affiliations and partnerships, Reebok lags the major footwear brands in popularity by a wide margin, according to Cowen surveys:
“Within athletic apparel, average annual share for the Reebok brand was 4.6% in 2019 versus 5.1% in 2018 among the total population. The 4.6% preference share for Reebok trails Nike at 36.9%, Under Armour at 17.4%, and adidas at 14.1%.”
