The Adidas Group has asked prospective buyers for the Reebok business to submit a first round of bids next week, according to Reuters, based on a projection that its sales will grow at an annual average rate of 10 percent in the next years, generating Ebitda of at least €200 million by 2025.
The brand is reportedly expected to make a loss in 2021 and to start delivering “slightly positive” core earnings in 2022, according to the unnamed sources. If such mid-term forecasts are deemed to be realistic, the brand could fetch more than the $1 billion figure mentioned by The New York Times in November.
According to Reuters, which quotes knowledgeable sources, the potential strategic investors include Anta Sports and Li Ning from China, Fila from South Korea and Wolverine Worldwide from the U.S. Noting that the organizers of last month’s Shanghai Half Marathon banned the participants from wearing Adidas T-shirts, observers feel that Chinese investors may refrain from joining the auction for Reebok because of the current boycott of western brands by local consumers because of their critical stance over the labor situation in the Xinjiang region of China.
The list of potential financial investors is said to include institutional investors like Apollo Global Management, Cerberus Capital Management, Sycamore Partners and Texas Pacific Group. The Financial Times had previously also mentioned Permira and Triton.
Adidas has declined to comment on Reuters’ report. The Adidas Group bought Reebok for $3.8 billion in 2006, but it has already written off a large portion of the related goodwill, reducing it to €842 million. In confirming the possible sale of the brand last December, Adidas said that Reebok started to make a profit in 2016, two years earlier than expected, and that it returned to growth in 2019 with a currency-neutral increase of 2 percent.
After a long review of the brand, Adidas decided to start a formal process to divest in February. In November, The New York Times reported that JP Morgan Chase had been retained to assist in the process. Because of Covid-19, Reebok’s sales declined by 19.4 percent to €1,748 million last year. In constant currencies, they were down by 16.1 percent, including a decline of 12.3 percent in the fourth quarter.