Source Pravda.Ru

Adidas, Reebok $3,8 bln deal to challenge Nike

Herbert Hainer, Adidas' chief executive, was clear about the significance of the acquisition of Reebok on Wednesday. "It is a once-in-a-lifetime opportunity," he said, that would help the German sporting goods company challenge US-based Nike.

For some it was a case of déjà vu. When Adidas agreed in 1997 to acquire Salomon, the French ski and golf equipment maker, similar words were spoken and the reaction from investors and analysts was positive. The talk was of "changing the rules of the game" and finally offering real competition to Nike.

Fast forward eight years and Mr Hainer, who had been on the management board for six months when Salomon was bought, now has the opportunity to prove that this time the rhetoric matches up to reality. "The driving force for this deal is Herbert Hainer," says an industry executive. "Size is so important to Adidas."

For Adidas, the Reebok deal catapults it from having revenues little more than half the size of Nike to being able to look its US rival directly in the eye. "This deal is all about facing up to Nike," said one person involved in it.

The US market - the world's largest with over half of all sporting goods revenue - has been dominated by Nike, which has a 36 per cent share of the footwear market. Adidas will more than double its share to 21 per cent, becoming the clear number two, informs Financial Times.

But the fact that the two companies will continue to compete until the deal has been completed and will then be run as separate businesses concerned some analysts, who worried about debt and doubted whether there would be genuine synergies.

Robin Stalker, Adidas's chief financial officer, said the cost-savings - expected to be €125m by the third year - would swiftly outweigh the costs. He said the deal, which has yet to be approved by US and EU competition authorities, would enhance earnings in the first full year. Job losses among the combined 26,000-strong workforce will supposedly be kept to a minimum.

Adidas simultaneously reported an 8% increase in second-quarter sales to €1.5bn, despite a slight fall in Europe and operating profit up 25% to €123m, with net income up from €70m to €94m. It is selling its winter sports business Salomon, which lost €27m, reports Guardian.