Adidas Sells 'Reebok' After 15 Years of Ownership... Quick Sale Despite $1.3 Billion Loss

Bought for $3.8 Billion in 2006... Sold for $2.5 Billion
ABG Acquiring Reebok, Soon to Pursue IPO... Apparel Companies Continue Acquisitions

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Adidas announced that it has decided to sell the Reebok brand at a price $1.3 billion (approximately 1.5 trillion KRW) lower than the purchase price after 15 years of ownership. Reebok, which has been experiencing poor performance since 2019, was evaluated as difficult to recover due to the COVID-19 pandemic. Authentic Brands Group (ABG), the new owner of Reebok, has recently been acquiring clothing brands that went bankrupt due to the COVID-19 crisis and is reportedly planning to go public (IPO) soon.

On the 12th (local time), Adidas announced in a statement that it will sell the Reebok brand to ABG for $2.5 billion. Adidas stated, "Most of the acquisition price will be paid in cash upon completion of the transaction, and some may be deferred or contingent consideration," adding, "Most of the transaction proceeds will be shared with shareholders after the deal is finalized." However, Adidas did not disclose specific transaction terms or agreements.

According to The Wall Street Journal (WSJ), Adidas had previously announced in February that it would sell the Reebok brand due to severe sales decline. Adidas purchased Reebok in 2006 for $3.8 billion with the intention of developing it as a sports brand to compete against Nike, but poor performance continued thereafter.

Before the COVID-19 pandemic, in 2019, the book value had already plummeted to 840 million euros (approximately 1.15 trillion KRW), half of the previous year. Major investors raised their voices to sell the Reebok brand, and it is known that the brand was hastily sold at a price much lower than the purchase price.

Meanwhile, ABG, the new owner of Reebok, is a comprehensive marketing company jointly invested by investment firms including BlackRock, the world's largest asset management company. ABG is known for acquiring clothing brands such as Brooks Brothers and Forever 21, which went bankrupt due to the COVID-19 impact. According to CNBC, ABG plans to pursue an IPO after acquiring Reebok and aims to create a comprehensive clothing brand through public offering funds.