A key bidder has dropped the auction for Reebok, making it more likely that Germany-based Adidas will suffer an even bigger blow after its disastrous 15-year stint as owner of the struggling sneaker brand, a learned The Post.
As reported by The Post, Authentic Brands Group – a fast growing licensing company whose properties include Forever 21, Brooks Brothers and Nine West – offered Reebok around $ 1 billion in the first round of the auction, by partnering with Wolverine Worldwide, the shoe maker behind Merrell Shoes, Hush Puppies and Stride Rite.
But talks with New York-based ABG recently thwarted claims from Adidas that ABG operate Reebok as a stand-alone business, sources said. In addition to paying fees to Adidas for at least several years as part of a transition services agreement, Adidas was asking ABG to avoid layoffs of Reebok employees, while continuing to feed the distribution networks of sneakers from Adidas, insiders said.
Instead, ABG’s chief executive – prolific negotiator Jamie Salter – had wanted to buy the rights to the Reebok name and integrate its US operations with Sparc Group, its joint venture with shopping center giant Simon Property which runs Aeropostale, Brooks. Brothers, Forever 21, Lucky Marque and Nautica. Wolverine Worldwide, meanwhile, planned to help with manufacturing sourcing overseas.
“Adidas wants to sell Reebok with everything and wipe their hands,” said a source familiar with the situation. But ABG’s Salter “just buys brands and licenses them. There would be job losses in Europe.
The offer from Authentic Brands – which on Wednesday filed its intention to go public with the Securities and Exchange Commission – was the highest for Reebok. The money-losing label – which recently raced to revive its business in a partnership with rapper Cardi B. – also attracted offers from buyout companies Advent International, Cerberus Capital Management, CVC Capital Partners and Sycamore Partners, sources said.
Still, the 126-year-old shoe icon’s auction, which began in February, will only fetch a fraction of the $ 3.8 billion Adidas paid in 2006.
The company’s large losses – over $ 100 million in a year before interest, taxes and depreciation, according to a source – mean potential buyers can’t borrow money for the purchase. It projected profits within five years under a new owner, but a source said Reebok’s revenue fell to $ 1.5 billion last year from $ 1.8 billion in 2019.
Ironically, it was the partnership with Sparc that would have allowed ABG to pay a higher price for Reebok than rival bidders – in part because of the layoffs it would entail, sources said. Meanwhile, Wolverine is not interested in bidding without Authentic Brands, sources said.
Adidas has set a deadline of August 2 for binding second-round offers. While ABG has abandoned the process, some insiders are not ruling out that it may reach a last-minute compromise with Adidas. Either way, sources expect Adidas to sell Reebok because a disappointing price shouldn’t have a big impact on its stock price.
Founded in England in 1895, Reebok took off in the 1980s with the launch of the first athletic shoe specifically designed for women. Reebok has since lost its footing as it seeks to compete with a growing number of women’s fitness brands, including Saucony and Puma.
“Going forward, the company intends to focus its efforts on streamlining the leadership position of the Adidas brand,” the company said in a February press release.
Representatives for Adidas and ABG declined to comment.