Adidas-Salomon's proposed $3.8-billion purchase of Reebok International Ltd. could dramatically reshape the global athletic shoe and apparel industry, creating a more formidable competitor to industry giant Nike Inc. and putting more pressure on a host of much smaller manufacturers.
The proposed combination, which the companies announced early Wednesday, would allow Adidas and Reebok to build on their respective strengths, industry analysts said. Adidas, based in Germany, is dominant in Europe and Asia, is big in soccer and is known for its shoe technology; fashion-savvy Reebok, based in Massachusetts, is popular in all the major U.S. sports and has long sought to grow overseas.
For The Record
Los Angeles Times Friday August 05, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 32 words Type of Material: Correction
Adidas-Reebok deal -- A chart in Thursday's Business section with an article about Adidas-Salomon's proposed acquisition of Reebok International gave Adidas' 2004 sales as $7.06 trillion. It should have said $7.06 billion.
By scooping up Reebok for $59 a share, Adidas would more than double its sales in the U.S., which accounts for 44% of the $20.4-billion branded athletic shoe market worldwide, according to Sporting Goods Intelligence Inc., a Glen Mills, Pa., research firm. Together, the two companies would have more clout in dealing with retailers such as Foot Locker Inc. and Sports Authority Inc.
"The message from this deal is 'Get big or get out,' " said Peter Sealey, a UC Berkeley marketing professor and a former Coca-Cola Co. executive.
Together, No. 2 Adidas and No. 3 Reebok would have a global market share of 25%, narrowing the gap with Nike, which has a 33.2% share, according to Sporting Goods Intelligence.
Adidas and Reebok said they planned to maintain their separate brands and their current rosters of products, which include athletic shoes, apparel and sports equipment.
Investors cheered the news. Reebok shares rose $13.19, or 30%, to $57.14 on Wednesday. Adidas' shares in Germany rose nearly 7%. Nike shares rose $1.09 to $86.92.
Industry analysts said Wednesday's deal meant that other shoes were likely to drop, meaning that more buyouts might lie ahead.
"This is an industry that's consolidating at a very rapid clip, and we think you're going to see a lot more of this happening," said John Shanley, an analyst with Susquehanna Financial.
James S. Davis, chief executive of New Balance Athletic Shoe Inc., currently the fifth-largest shoe company by market share, agreed.
"What this really says to me is that consolidation will continue to take place at both the retailer and supplier level," he said in a statement. In a reference to his company's future, Davis said that "New Balance's goal has always been to be the best, not the biggest."
