Case study on Adidas and Reebok
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SUBMITTED BY: ABHINAV MEHRA MBA-IB A1802009094
a second production facility was bought in Herzogenaurach.by Adolf Dassler (Adi) & his brother Rudolf Dassler under the name "Dassler Brothers OHG". rival Nike. the company also produces other products such as bags.Adi registered the "Three Stripes" as his official logo. 1949. the brothers decided to part ways.000 Reichsmark. The"Three Stripes" were bought from the Finnish sport company Karhu Sportsin the 1950s. shirts.80 billion. The company revenue for 2009 was listed at ¼10. the brothers purchased the factory and named it "Dassler Brothers Sports Shoe Factory. and Rockport." The company introduced tennis shoes in 1931. The company's clothing and shoe designs typically feature three parallel bars. Germany. which consists of the Reebok sports wear company.S.In 1930. Besides sports footwear.watches. and the same is incorporated into Adidas's current official logo. In the year 1935. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world. eyewear and other sports and clothing related goods. The company's shoes made their debut at the 1928 Olympics in Amsterdam. Taylor Made-adidas golf company. the turnover of the company exceeded 400.
Founded in 1924 . Adidas was registered as a company -'Adi' from Adolf and 'Das' from Dassler.INTRODUCTION
Adidas AG is a German-based sports apparel manufacturer and parent company of the Adidas Group. By August 18.In 1938. after its U.
. Rudolf set up another sporting goods company named Puma.In 1948.38 billion andthe 2008 figure at ¼10.
Strong international operations -Strong distribution chain
-High cost structure -Over pricing -Low quality products/services -Limited product line.
-Competitive pricing -Good financial position -Effective Marketing Strategy -Market Leadership -Strong online presence & Brand .
.5 Million 1985 $307 Million IPO 2002 $ 3.000 employees Other companies owned: Rockport. 6. Massachusetts Product distributed in more than 140 Countries 21 Foreign subsidiaries. Greg Norman collection. Polo-Ralph Lauren footwear.2 Billion Corporate headquarters -.Canton.History of reebok
Ancestor company founded in 1895 by Joseph Foster in Bolton England to manufacture running shoes with spikes. and On Field 10-year licensing deals with NFL and NBA 200 Outlet & Concept Stores in 12 Countries.In 1958 two of the Foster¶s grandsons started a companion company known as Reebok named for an African Gazelle Reebok Sales History 1981 $ 1.
.1 billion ($3. with great strengths
1)In August 2005.Two mega brands. German Adidas-Salomon AG announced plans to acquire Reebok at an estimated value of ¼ 3.ANALYSIS
Strengths-Growing sales revenue -Excellent marketing strategy -Strong women¶s sector
Weaknesses-µClassics¶ under fire -Low market share in apparels -Danger of stockpiling products by retailers
Adidas and Reebok .
2%. Adidas would buy all the outstanding shares of Reebok at $59 per share in cash. as per the closing share price of $43. 4)The share prices of both the companies recorded an increase on the day of the announcement of the deal. 2005 to ¼158. 5)The share price of Adidas increased by 7. Both companies competed for No.95 on August 02.4billion.95.45 on August 03. an increase of 30% over the August 02. 2005 share price of $43. Adidas had a market capitalization of about $8. 3)Reebok reported net income of $209 million on sales of about $4 billion. 2005.14 on August 03. 2005 on the Frankfurt stock exchange.2)At the time. 2 and No.4% from ¼147.
. and reported net income of $423 million a year earlier on sales of $8.52 on August 02.1 billion.
FINANCING THE DEAL
1)According to the merger deal. 2)This price represented a premium of 34.
6)Analysts felt that the merger made sense. 2005. while Reebok's share price at the New York Stock Exchange rose to $57. the purpose of the merger was very clear. 3 positions following Nike.
Nike had about 36%. but it struggled in the U. 2 sporting goods manufacturer globally.2% market share in the athletic-footwear market in the U. 5)The acceleration of both brands is brought about through increased operating cash flows.9% and Reebok 12. Adidas 8.
1)Nike was the leader in U. other synergies such as operating savings are realized. 6)Along with the increased operating capital.3)Adidas proposed to fund the purchase through an arrangement of debt and equity. and had made giant strides in Europe even surpassing Adidas in the soccer shoe segment for the first time. 2)According to 2004 figures by the Sporting Goods Manufacturers Association International. 4)The deal price was equal to the latest twelve month sales of Reebok and 11. but the increased operating costs coupled with the synergies will help promote further brand recognition through marketing.Adidas was perceived to have good quality
.S .7 times its EBITDA .S.S 3)Adidas was the No.
7)Catching up to Nike's huge marketing budget is a challenge.
which marks a new chapter in the history of our Group. marketing.
The ADDYY and RBK Merger ± Impossible is Nothing
1)On January 31. For a successful merger. the No. and production and Reebok's U. engineering. 2006. Puma had then recently disclosed expansion plans through acquisitions and entry into new sportswear categories.5 billion ($11. 5)Adidas focused on sport and Reebok on lifestyle.
6)Besides Adidas was facing stiff competition from Puma. colours. 2)Adidas-Salomon AG Chairman and CEO Herbert Hainer said. 4)Nike had both and was a favourite brand because of its fashion status. the challenge was to integrate Adidas's German culture of control.driven culture. Adidas closed its acquisition of Reebok International Ltd. By combining two of the most respected and well-known brands in the worldwide
. 4 sporting-goods brand. apparel markets.products that offered comfort whereas Reebok was seen as as stylish and hip brand. The combination provided the new Adidas Group with a footprint of around ¼9. Clearly the chances of competing against Nike were far better together than separately. and combinations.8 billion) in the global athletic footwear.S."We are delighted with the closing of the Reebok transaction.
5 billion). These investments would guide the companies towards effective consolidation. events and leagues.sporting goods industry. "The brands will be kept separate because each brand has a lot of value and it would be stupid to bring them together. 2)Sales increased to ¼2. 3)Hainer also said. 4)In 2007 Adidas brand had sales worth ¼7.3 billion in 2006.4 billion (US$3. up 14 percent from ¼483 million in 2006.9 million) from ¼13 million in 2006.
4)Adidas declared that the deal would involve investment in both Adidas and Reebok. the new Group will benefit from a more competitive worldwide platform.
1)Its net income rose to ¼21 million (US$31.6 billion & Reebok¶s ¼2.In 2006 the Adidas brand had sales worth ¼6. athletes.7 billion) compared to nearly ¼2.1 billion (US$10. 3)In 2007.9 million). The companies would continue selling products under respective brand names and labels. well-defined and complementary brand identities. and a stronger presence across teams.5 billion
. total yearly earnings were ¼551 million (US$837. a wider range of products.3 billion (US$3.8 billion) while Reebok had sales worth ¼2.
Patents. technology & innovations
Weaknesses-Differing values among management -Complexity of joining two corporate cultures -Both companies belong to different countries
. -Shared R&D.Acclivity in market share .Adidas-Reebok SWOT Analysis (Post merger)
Strengths-More products for different customers -Increase in product line .Now both upper and middle priced markets are covered.
Will Nike do it or will the Adidas-Reebok merger spoil its plans.
Nike completed acquisition of Umbro Plc on March. still remains to be seen. This step will make it less likely that retailers will discount Reebok shoes in order to clear their inventories.Issues facing Adidas
The most critical issue facing Adidas is its effort to turn around Reebok. Company is working to change customer¶s perception of Reebok from that of discount shoe brand to a premium brand.2008. Nike is planning to increase its business to $23 billion in revenue by 2011.
. For this company has switched the Reebok whole sale model form bulk preorder to pay as you go. Takeover is an effort to consolidate its position in the football market where Adidas has performed well.
4)The addition of Reebok will enhance not only its position among the top US distributors like Foot Locker and Dick's. 3)Adidas will benefit from increased distribution in North America.CONCLUSION
1)Analysis of the Adidas-Reebok merger shows how it will gain a sustainable competitive advantage that may one day dominate the footwear industry both domestically and internationally. executed and the necessary precautions taken for the deal a company can achieve its strategic objectives and thus ensure its growth & profitability through mergers & acquisition. where Reebok already has a significant presence. 6)Thus .
. 2)The fact that Adidas and Reebok control such different aspects of the shoe industry will help to ensure their success. brand name. because the increased presence further engrains the most important advantage in this industry. 5)Increasing its presence is the key to achieving sustainable competitive advantage. but will also give Adidas-Reebok more power over promotions and in-store displays.we can conclude that if the acquisition is well planned.