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.
Evaluate the pros and cons of merger.
Mergers and acquisition commonly are two ways to pursue strategies. When two companies come into a mutual conclusion, mergers and acquisition can derive both advantages and disadvantages for the company. In Adidas and Reebok mergers, it can be seen that both companies facing pros and cons. 3.1
Advantages of merger.
The market analysts were doubtful about the merger being a strategy to withstand the competition from the nearest rival, Nike. Nike is the world’s largest sports goods, apparel and equipment maker. Nike had strong market share in the United States and the European Union. With the merger, Adidas with the support of Reebok can outstand in the performance and can reach the...
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