F ADIDAS REEBOK

(Merger & acquisition)

Case study

Presented by: Zia Rahman Safi

Rishav
 Introduction & History
Adidas :
1)– In 1920, Adolf Dassler produced a handmade shoe fitted with black spikes.

2)– On July 1 1924 Adi and his brother rudolf Dassler started the company
under the name “Dassler brothers OHG” in Germany.

3)– The company’s shoes made their debut at the 1928 Olympic in Amsterdam.

4)– In the year 1935 the turnover of the company exceeded 400000
Reichsmark .

5)– In 1948 , the brothers decided to part ways . By August 18 1949Adidas

was registered as a company .

6)– Rudolf Dassler setup another sports company named its “PUMA”.
7) – Adi registered the “three strips” as his official logo.

8)- In 1956, Adi’s son Horst Dassler promoted Adidas strongly during the
Olympic game at Melbourne.

9)– In 1959 , Horst was assigned the job of establishing production facilities in
France.
10) – In 1960, Adidas was dominant brand at the Olympic games held in Rome, 75% of track
and field athletes used Adidas shoes.

11) – In 1972, “Trefoli “ logo was launched.

12) – In 1975 Adi become the member of National Sporting Goods Association
(NSGA).

13) – In 978 Adi passed away and his family began to oversee the business ,
which by then produced 45 million pair of shoes in a year.
14)– Horst died in 1987. In 1990, Barnard Tapie bought the company for the
for $ 320 million on borrowed money from credit Lyoonnais Bank*.

15)– In 1922 , the bank converted debt into equity when Tapie failed to pay the
interest on the loan.

16)– In 1995, the company got listed itself on the Paris* and frankfurt* stock
exchange.

17)– In 1997, Adidas acquired French based Salomon group for $ 1.4 billion
and named as Adidas-Salomon group.

19)– In 1998 Adidas listed in DAX* index.

20) – In march 2001 Herbert Hainer become the new CEO and chairman of the
group. Company’s business segment footwear apparel and equipment (ex iii).

21) – In 2004 with the 110 subsidiaries and more than 17000 employees the
company achieved the sales of euro 6.478 billion and profit of euro 314 million.
Reebok :
1)– In 1895 , Joseph William Foster founded J.W. Foster and Sons in UK.
Foster manufactured first ever shoes with spikes to help athletes to run faster.
And spike shoes made their debut in 1924.

2)– In 1958 two of Foster grandsons started company “Reebok International”.

In 1979,Reebok International secure distribution right in US through Paul
Fireman.

3)– In 1979 , Paul Fireman started company “Reebok USA Limited”.

By the end of 1981 Reebok International’s sales surpassed $ 1.5 million.
In 1984 Reebok International and Reebok USA Limited merged and “Reebok
International Limited ” was formed .

4)– In 1985 Reebok’s sales reached $ 307 million and the same year Reebok
come out with its IPO.
5)– In 1986 , Fireman become the chairman of the company .

6)– Reebok made a series of acquisitions in the late 1980s i.e. he purchased the
Rockport compony in 1986 , Avia Group International in aprail 1987 and
Ellesse international S.P.A* in september 1987 and also acquired CMI’ Boston
Whaler unit.

7)– In 1992, it created shoes and apparel for sports.

8)– In December 2000 ,The reebok entered into a partnership with the
National Football league (NFL) .

9)– In August 2001, Reebok entered into a strategic partnership with Nationa
l Basketball Association (NBA).
– In January 2002 , Reebook initiated a worldwide marketing drive called
“the sound and rhythm of sports”. And in same year launched it’s product
line “Rbk”.

11) – In 2004, Reebok made sales of $ 3.785 billion and profit of $ 192.4
million.Its products available in 170 countries.
 Mission, vision and values of Adidas
Mission : -
The Adidas- Salomon Group strives to be the global leader in the sporting goods
industry with brands built on a passion for sports and a sporting lifestyle. We are
committed to continuously strengthening our brands and products to improve our
competitive position.

Vision statement: -
To be the design leaders with a focus on getting the best out of the athletes with
performance guaranteed products in the sports market globally.

Values : -
Performance:
Sport is the foundation for all we do and executional excellence is a core value
of our Group.
Passion:
Passion is at the heart of our company. We are continuously moving
forward, innovating, and improving.

Integrity:
We are honest, open, ethical, and fair. People trust us to adhere to our
word.

Diversity:
We know it takes people with different ideas, strengths, interests, and
cultural backgrounds to make our company succeed. We encourage
healthy debate and differences of opinion.
 Mission & Vision of Reebok
REEBOK'S VISION :
Fulfilling Potential
Reebok is dedicated to providing each and every athlete - from professional
athletes to recreational runners to kids on the playground - with the opportunity,
the products, and the inspiration to achieve what they are capable of. Everyone
has the potential to do great things. As a brand, Reebok has the unique
opportunity to help consumers, athletes and artists, partners and employees
fulfil their true potential and reach heights they may have thought un-reachable.

REEBOK'S MISSION :
Always Challenge and Lead through Creativity
At Reebok, we see the world a little differently and throughout their history
have made their mark when they've had the courage to challenge convention.
Reebok creates products and marketing programs that reflect the brand's
unlimited creative potential.
 Competition with NIKE
 Nike was the leader in U.S. and had madegiant strides in Europe even
surpassing Adidas in the soccer shoe segment for the first time.

According to 2004 figures by the Sporting Goods Manufacturers

Association International, Nike had about 36%, Adidas 8.9% and Reebok
12.2% market share in the athletic-footwear market in the U.S.

 Adidas was the No. 2 sporting goods manufacturer globally, but it struggled
in the U.S. – the world’s biggest athletic-shoe market with half the $33 billion
spent globally each year on athletic shoes.

 Adidas was perceived to have good quality products that offered comfort
whereas Reebok was seen as a stylish or hip brand.
• Nike had both (quality and style) and was a favorite brand because of its
fashion status, colors, and combinations.

• Adidas focused on sport and Reebok on lifestyle.

•Clearly the chances of competing against Nike were far better together
than separately.

•Besides Adidas was facing stiff competition from Puma, the No. 4
sporting-goods brand. Puma had then recently disclosed expansion plans
through acquisitions and entry into new sportswear categories.

•For a successful merger, the challenge was to integrate Adidas’s German

culture of control, engineering, and production and Reebok’s U.S.
marketing- driven culture.
Market share of Nike, Adidas and Reebok before merger
 The Merger
1)– On August 03, 2005, Adidas-Salomon Announced acquisition of Reebok
International Limited for $3.8 billon.

2)– The share price of Adidas increased by 7.4% , while Reebok’s share price
increase 30%.

3)– It was a friendly takeover.

4)– Adidas and Reebok claimed that the merger was decide upon joining
instead of competing.

5)– Both company had reputation of using cutting-edge technology.

Merger will help spreading globally.
6)– According to the merger deal Adidas would buy all the outstanding share
of the Reebok.

7)– The price at which shares were buy represent the premium of 34.2%.

8)– Adidas proposed to fund the purchase through an arrangement of debt and
equity.

9)– The merger was subject to approval by the share holder’s of Reebok.

10)– The deal price was equal to twelve months sales of Reebok and 11.7
times its EBITDA.
 Objective of Merger
1) – Fulfillment of individual goals.

2) – Defeating Nike.

3) – Integrated Research & Development.

4) – Sharing Technology.

5) – Expand business into Global business.

6) – Cost saving.
particulars Adidas reebok nike
Year founded 1949 1895 1962
Headquarters Hergogenerauch,Germany Canton, massachusetts Beaverton, oregon
Employees 17000 9102 24667
Major brands Adidas ,salomon, bonfire, Reebok , reebok classic, Nike, nike golf converse
Arc’teryx adidas golf, Rockport, Rbk, greg cole saal, Exeter brands
taylormade adidas golf maxfli norman collection, the group
hockey company
Hot product Intelligent shoe with Rapper nelly’s footwear Lance armsrong’s 10/2
embedded chip that conform and athletic line coming apparel line introduced in
for better support late 2005 July

Us athletic shoe market 8.9% 12.2% 36.3%

share
Global athletic shoe 15.4% 9.6% 33.2%
market share
Annual revenue $7.9 billion $3.8 billion $12.3 billion
Annual net income $326.5 million $194.4 million $1.2 billion
Current market $8.9 billion $2.6 billion $ 16 billion
capitalization

Comparative Position (2004)

 Key Decisions
1) – Separate entities

2) – Separate management.

3) – Separate advertising programs & distribution centers.

4) – Investment in both companies.

 Motives for Adidas and Reebok merger
• To enhance its market share in U.A

• Competition with Nike and other brands

• Competitive advantage on sales, marketing, skilled workers and

technology

• Market expansion
STRENGTHS WEAKNESSES

1) Adidas is strong in Europe , Reebok 1) Many overlapping products.

is strong in US & Aisa.

2) Complementary licenses and 2) Two HQ’s that will be hard to

contracts. integrate..

3) Reduced costs for retailers. 3) Two very strong , distinct

corporate cultures.

4) Reebok is extremely strong in

Women’s wear.
OPPORTUNITIES THREATS

1) Leverage combined R & D strengths 1) Competition between brands

& budgets. employees.

2) Bring Reebok’s women’s wear to 2) Cannibalization of sales.

Europe.

3) Reduce costs to retailers by larger 3) Realization of revenue growth

distribution networks. Synergies.

4) Ability for better reaction to global 4) Adidas may treat Reebok as a

trends . Second tier brand.
 Strategic Analysis
1) – Cost leadership strategy.

2) – Licensing strategy.

3) – Promotional Strategy.

4) – Distribution Strategy.

5) – Sponsorship Strategy.

6) – Discount Based Marketing Strategy.

 Findings
1)– Adidas acquired Reebok in a friendly merger.

2)– The merger value is nearly US $ 3.8 billion.

3)– Adidas will buy all the stocks of Reebok international.

4)– Adidas and Reebok will operate as separate entities.

5)– Adidas and Reebok will become the second and the third largest sports
equipment manufacturer in the world.

6)– The main theme of the merger is to withstand the competition of Nike in
the united states and the European union markets.
7)Due the merger, the company will implement the cost reduction techniques,
sharing of patents, technology and human resource.

8) – The annual sale of combined group after merger was predicted to be $ 11.7
billion.

9) – The acquisition was expected to give the companies products a strong push
in the US market because of the links with Reebok.
 Recommendation
1) – The price of acquisition is very high that can be reduced.

2) – There was no need to purchase all the outstanding shares.

3) – Both companies can also launch a new brand relating to sports.

Thank
You…