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BERLIN (Reuters) -Adidas is selling its Reebok brand to Authentic Brands Groups for up to 2.1 billion euros ($2.46 billion) as the German sporting goods company seeks to focus on its core brand after the U.S. fitness label failed to live up to expectations.
Adidas (OTC:ADDYY) bought Reebok for $3.8 billion in 2006 to help to compete with arch-rival Nike (NYSE:NKE), but its sluggish performance led to repeated calls from investors tosell the brand.
In the meantime, Adidas managed to eat into Nike’s dominance in the United States with its core brand, helped by partnership with celebrities like Kanye West, Beyonce and Pharrell Williams.
After Kasper Rorsted took over as Adidas CEO in 2016, he launched a turnaround plan for Reebok, which helped it return to profitability, but its performance continued to lag that of the core Adidas brand and it was then hit by the COVID-19 pandemic.
It has already sold the Rockport, CCM Hockey and Greg Norman brands for 400 million euros, which had been part of the original Reebok acquisition.
Authentic Brands Group (ABG) has rapidly amassed over 30 labels that are sold at about 6,000 stores. Its rich portfolio of brands include those in media, entertainment, fashion, home, active and outdoor lifestyle sectors.
“This is an important milestone for ABG, and we are committed to preserving Reebok’s integrity, innovation, and values – including its presence in bricks and mortar,” said Jamie Salter, founder, chairman and CEO of ABG.
Last month, ABG filed for a U.S. initial public offering following a year that saw the parent of apparel chains Aéropostale and Forever21, as well as and Sports Illustrated magazine, post strong earnings growth.
It lists asset manager BlackRock Inc (NYSE:BLK), U.S. private equity firm General Atlantic LLC and mall owner Simon Property Group Inc (NYSE:SPG.N) among its shareholders.
Adidas said in a statement that the sale had no impact on its financial outlook for the current year or for its targets set out in the five-year strategy it announced in March.
Adidas said the majority of the 2.1 billion euros would be paid in cash at the closing of the transaction, expected in the first quarter of 2022, with the remained comprised of a deferred and contingent consideration.
It said it would share the majority of the cash proceeds upon closing with its shareholders.
($1 = 0.8526 euros)