The Adidas - Reebok Merger
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Case Details:
Case Code : BSTR177
Case Length : 21 Pages
Pages Period : 1997-2005
Organization : Reebok International Limited
Pub Date : 2005
Teaching Note :Not Available
Countries : US, Germany
Industry : Footwear and Apparel
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Please note:
This case study was compiled from published sources, and is intended to be US, Germanyed as a basis for class discUS, Germanysion. It is not intended to illUS, Germanytrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"We want to grow both brands together faster than the individual brands and of course, grow faster than our competitors." 1
- Herbert Hainer, Chief Executive Officer, Adidas, in 2005.
"With Adidas, we are able to offer an enabled portfolio of global brands that truly addresses the needs of today's and tomorrow's consumers." 2
- Paul Fireman, Chief Executive Officer, Reebok, in 2005.
Introduction
On August 03, 2005, Adidas-Salomon AG (Adidas), Germany's largest sporting goods maker announced acquisition of the US-based Reebok International Limited (Reebok) for $3.8 billion. The share prices of both the companies recorded an increase on the day of the announcement of the deal.
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The share price of Adidas increased by 7.4% from €147.52 on August 02, 2005 to €158.45 on August 03, 2005 on the Frankfurt stock exchange, while Reebok's share price at the New York Stock Exchange rose to $57.14 on August 03, 2005, an increase of 30% over the August 02, 2005 share price of $43.95. The deal would result in the union of two cutthroat competitors through a "friendly takeover".
Adidas and Reebok claimed that the merger was decided upon because of the realization that their individual (company) goals would be best accomplished by joining instead of competing. Nike International Inc. (Nike) was the common competitor for both Reebok and Adidas.
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Analysts said that the merging companies were alike in many ways. Both the companies had a reputation of using cutting-edge technologies to produce innovative products and both had eminent brand ambassadors from the sports and entertainment worlds.
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Thus, the merger would help spreading the global appeal of the brands in places where they had not made a mark as individual brands. However, some analysts had doubts about the success of the merger of the companies.
They cited that the merger would not generate much synergy because the individual brand identities would be maintained even after the merger.
Analysts also doubted the effectiveness of the merger, as a strategy to beat Nike. They felt that the combined entity would have to work really hard to further expand its market share in the US market and globally. |
The Adidas - Reebok Merger
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