REEBOK ACQUISITION
With its impressive revenue of £353 million ($489 million) in 2020, it looks as if brand management company, Authentic Brands Group, (ABG) won’t be slowing down anytime soon, pandemic or not. On 12 August 2021, it was announced that German apparel giant, Adidas was selling its subsidiary Reebok to ABG for £1.75 billion ($2.5 billion). Of this latest acquisition, 4 times larger than any other that ABG has made to date, Jamie Salter, the Group’s CEO, said:
“This is an important milestone for ABG, and we are committed to preserving Reebok’s integrity, innovation, and values – including its presence in bricks and mortar. We look forward to working closely with the Reebok team to build on the brand’s success.”
A SOUGHT-AFTER BRAND?
ABG has had its eye on Reebok for some time, although equity companies such as Advent International, Cerberus Capital Management, CVC Capital Partners and Sycamore Partners had also shown interest in acquiring the brand. Salter said:
“We’ve had our sights set on Reebok for many years, and we’re excited to finally bring this iconic brand into the fold. “Reebok not only holds a special place in the minds and hearts of consumers around the world, but the brand also has expansive global distribution.”
GETTING RID OF THE STEPCHILD
Adidas claimed that it was eager to focus on the ‘further strengthening’ of its namesake brand, and Reebok has often been likened to its stepchild as it was only about 5% of the size of Adidas. The German conglomerate acquired Reebok in 2006 for £2.75 billion ($3.8 billion) thereby losing £1 billion ($1.3 billion) but Adidas had sold some minor brands that were in the Reebok bundle, namely Rockport, CCM Hockey and Greg Norman. In 2020, Adidas experienced a 14% decline in turnover at £16.5 billion (€19.4 billion) down from £20.1 billion (€23.6 billion) in 2019. Reebok’s sales were £1.2 billion (€1.4 billion) in 2020, a decrease of 19% over the previous year.
OPPORTUNITIES FOR ALL
It’s predicted that the ABG-Reebok alliance will be beneficial for both parties. With ABG’s brand management expertise, Reebok will no doubt experience a much-needed brand revival, at the very least. President of Customer Growth Partners and Growth Forecaster, Craig Johnson, said:
“If you’re a Reebok brand lover or even just neutral on it, you like to see companies are doing new and interesting things to succeed. Reebok hasn’t been doing a lot of that.”
For ABG, the acquisition means that it is tapping into a lucrative market. Reebok operates in 80 countries, and ABG in 136. As such, the deal opens up over 50 new markets for Reebok, a true win-win. Reebok’s international presence will also enable ABG to bring in new partners as well as lever opportunities for its other popular labels. Salter, almost joyously, said:
“It’ll be business as usual all over the world. The stores, the internet and the customer are all staying intact. We’ll just be streamlining the process and will still deliver great product, but in a different way.”
NOT MUCH WILL CHANGE
While Reebok will extricate itself from Adidas, Salter doesn’t envisage any radical changes for the brand – yet. Reebok will do all the designing, and when orders are received, these will be sent to the brand’s existing manufacturing facilities, primarily in Vietnam. This will cut out any third party licensees, and thereby drive profits. Salter said:
“We’re still not going to hold or ship any inventory. We will control the distribution but instead of DTR [direct-to-retail], we’ll eliminate the middleman. ABG will hand-select accounts in specialty, family footwear sporting goods, department stores, off-pricers and clubs, and then go narrow and deep with them. That will provide more margin for our wholesale and retail partners globally.”
Salter does not intend to make any immediate changes to Reebok’s high-profile collaborations with the likes of Ariana Grande and Cardi B. He said:
“All the contracts they have stay in place.”
The brand has previously collaborated with big names such as Victoria Beckham and Gigi Hadid.
ENTER WALL STREET
With the Reebok deal waiting in the wings, in July 2021, ABG’s ambition to become a market leader in retail was showcased by its IPO filing on Wall Street, hoping to raise $500 million. Bloomberg estimates that the company could be worth $10 billion. According to Salter, in 2019 when BlackRock purchased a 30% stake in ABG for $875 million, it was valued at approximately $4 billion. Salter said:
“We believe our acquisition history, financial resources, ability to employ creative transaction structures and speed of execution position us as a buyer of choice.”
As of August 2021, Fanatics was valued at $18 billion, almost double the potential valuation of ABG.
