Adidas wins approval from EEU to buy Reebok | india | Hindustan Times
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Adidas wins approval from EEU to buy Reebok

Adidas, the number two in the sports goods market, wants to buy Reebok to close the gap with top rival Nike.

india Updated: Jan 26, 2006 13:04 IST
Reuters
Reuters
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German sporting goods firm Adidas-Salomon won approval on Tuesday from European competition authorities to acquire US rival Reebok in a deal worth $3.8 billion.

Adidas, the global leader for soccer products and number two in the sports goods market, wants to buy Reebok to close the gap with top rival Nike by having a stronger position in the United States and entering new markets.

"The Commission concluded that the transaction would not significantly impede effective competition in the EEU (European Economic Area) or any substantial part of it," the Commission said in a statement.

The takeover, agreed by the boards of the Boston-based and Bavarian-based companies, will create a company with combined annual sales of some $11.1 billion. Nike's sales in its 2004/05 business year to May were $13.7 billion.

It will give them increased leverage with retail outlets in the all-important US market and allow the brands to more directly challenge Nike on its home turf.

Reebok will bring key equipment licensing contracts with major North American professional sports leagues, including the National Football League, National Basketball Association, National Hockey League and Major League Baseball.

Sales are seen growing at a mid- to high-single-digit rate -- and in the United States they are expected to double. Cost savings are expected to reach $150 million annually by the third year after the deal closes.

Adidas said it expected no significant restructuring costs and that they would quickly be outweighed by synergies.

In the United States, Nike holds an estimated 36 per cent market share, followed by Reebok at 12.2 per cent and Adidas at 8.9 per cent, according to industry newsletter Sporting Goods Intelligence.

Adidas Chief Executive Herbert Hainer said most of the deal, in which Adidas is to buy the outstanding shares of Reebok for $59 per share in cash, would be financed by debt.

Adidas, famous for its three-striped soccer shoes, has struggled for years to take on Nike seriously in the United States.

First Published: Jan 26, 2006 13:04 IST