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Adidas buys Reebok for $3.8 bln

August 3, 2005

By Ulf Laessing

FRANKFURT (Reuters) – German sporting goods maker
Adidas-Salomon is buying U.S. rival Reebok in
a 3.1 billion euro ($3.8 billion) deal to expand its reach in
Nike’s home market.

Shares in Reebok surged 32 percent to $58.17 in Germany,
while Adidas was up 6 percent at 156.40 euros at 1005 GMT,
after it painted a bright outlook for the merged group.

Adidas shares had initially dropped 4 percent on the news,
as it said it would help fund the takeover with equity and as
some analysts questioned the deal’s benefits.

Adidas, the number two in the sporting goods industry
behind Nike, said on Wednesday it was buying the outstanding
shares of No. 3 player Reebok for $59 per share in cash, a 34
percent premium to Reebok’s closing share price on Tuesday.

It described the deal, to be funded through a mix of equity
and debt, as a friendly takeover.

The deal will more than double Adidas’s sales in North
America and boost its basketball and sports lifestyle fashion
business. The deal complements Adidas’s strengths in Europe and
Asia and its focus on sports such as soccer that are popular
there.

The acquisition still needs approval of Reebok shareholders
and antitrust authorities. Adidas expects to close the deal in
the first half of 2006 and foresees no significant
restructuring costs.

“I see the synergies very quickly outweighing the costs,”
Adidas Chief Financial Officer Robin Stalker told analysts on a
conference call.

Sal.Oppenheim analyst Joerg Frey had said earlier: “We are
skeptical because the deal is driven by U.S. expansion plans
and offers few synergies.”

CLOSING IN ON NIKE

With combined 2004 sales of roughly 9 billion euros, the
new group will close in on Nike’s $13.7 billion in revenues in
its 2004/05 business year to May.

“Together, we will expand our geographic reach,
particularly in North America, and create a footwear, hardware
offering that addresses a broader spectrum of consumers and
demographics,” Adidas Chief Executive Herbert Hainer said in
statement.

Reebok Chairman and CEO Paul Fireman would continue to run
the Reebok brand, Adidas said.

“Adidas is the perfect partner for Reebok,” Fireman said in
the statement, adding: “This transaction provides our
shareholders with good value for their shares.”

Adidas expects its net income to grow at least 10 percent
per year in the medium term following the Reebok acquisition,
Stalker told the conference call.

He expects sales to grow by a rate in the mid to high
single digits, and its operating margin to be above 11 percent.

Adidas said its net income in the second quarter rose 33
percent to 94 million euros, when adjusted for the sale of its
ailing winter-sports brand Salomon to Finland’s Amer Sports
— beating the average analyst estimate.

Sales rose 8.2 percent to 1.52 billion euros, which was
also slightly above the average estimate of 1.49 billion euros,
driven by growth in all regions except Europe.

For 2005, the Bavarian firm reiterated net income from
continuing and discontinued operations would rise 20 percent.

The Reebok takeover will boost earnings per share by an
unspecified amount in the first year after closing the deal,
Adidas said.

It also expects annual cost savings to the tune of 125
million euros by the third year after closing the deal.

The news comes one week after Adidas’s smaller rival Puma

unveiled plans to close the gap on Adidas and Nike by
making acquisitions and entering new markets.

(Additional reporting by Natalia Matter)

($1=.8183 Euro)




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