CASE- STUDY THE ADIDAS- REEBOK MERGER
The case discusses the proposed merger of Reebok International Limited with Adidas-Salomon AG. It describes the recent trends and studies the ongoing merger in the sporting goods industry. The case presents the rationale behind the decision to merge. Finally, the case ends with a debate on whether the merger would be successful.
Issues » The recent trends and structure facing the sporting goods industry » The reasons for the ongoing mergers and acquisitions in the industry and its future » The rationale behind the Adidas and Reebok merger » Whether the merger will be successful in the long-term Introduction On August 03, 2005, Adidas-Salomon AG (Adidas), Germany's largest sporting goods maker announced acquisition of the US-based Reebok International Limited (Reebok) for $3.8 billion. The share prices of both the companies recorded an increase on the day of the announcement of the deal. The share price of Adidas increased by 7.4% from €147.52 on August 02, 2005 to €158.45 on August 03, 2005 on the Frankfurt stock exchange, while Reebok's share price at the New York Stock Exchange rose to $57.14 on August 03, 2005, an increase of 30% over the August 02, 2005 share price of $43.95. The deal would result in the union of two cutthroat competitors through a "friendly takeover". Adidas and Reebok claimed that the merger was decided upon because of the realization that their individual (company) goals would be best accomplished by joining instead of competing. Nike International Inc. (Nike) was the common competitor for both Reebok and Adidas. Analysts said that the merging companies were alike in many ways. Both the companies had a reputation of using cutting-edge technologies to produce innovative products and both had eminent brand ambassadors from the sports and entertainment worlds. Thus, the merger would help spreading the global appeal of the brands in places where they had not made a mark as individual’s brand. However, some analyst had doubts about the success of the merger of the companies. They cited that the merger that would not generate much synergy because the individual brand identities would be maintained even after the merger. Analysts also doubted the effectiveness of the merger, as a strategy to beat Nick. They felt that the combined entity would have to work really hard to further expand its market share in the US market and globally ADIDAS (BACKGROUND) The story of Adidas dates back to the year 1920 when Adolf Dazzler (Adi) produced a handmade shoe fitted with black spikes. On July 01, 1924, Adi and his brother Rudolf Dazzler (Rudolf) started a company under the name "Dazzler Brothers OHG". In the year 1927, the company enhanced its capacity by taking on a new factory on lease. The company's shoes made their debut at the 1928 Olympics in Amsterdam. In 1930, the brothers purchased the factory and named it "Dazzler Brothers Sports Shoe Factory." The company introduced tennis shoes in 1931. In the year 1935, the turnover of the company exceeded 400,000 Reichsmark.3 In 1938, a second production facility was bought in Herzogenaurach, Germany. In
1948, the brothers decided to part ways. By August 18, 1949, Adidas was registered as a company -'Adi' from Adolf and 'Das' from Dazzler. Adi registered the "Three Stripes"4 as his official logo. Rudolf set up another sporting goods company named Puma. In 1956, Adi's son Horst Dazzler (Horst) promoted Adidas strongly during the Olympic Games at Melbourne. He also signed a licensing agreement with the Norwegian Shoe factory, located in Gjovik, Norway. In 1959, Horst was assigned the job of establishing production facilities in France A factory in Schweinfeld, Germany was started in the same year. In 1960, Adidas was the dominant brand at the Olympic Game help in Rome; 75% of the track and field athletes used Adidas shoes. Adidas stepped into the production of apparel and balls (soccer balls, basketball balls) in 1961 and started...
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