adidas challenges world market leader Nike
One year before the start of the World Cup Championship, adidas starts to challenge world market leader Nike. For 3.1 billion euros, the world's second largest sporting goods company will buy its US rival Reebok; now number three in the world. After the takeover, the combined annual revenue (based on figures from 2004) would amount to over 9 billion euros. This will bring the merged group even closer to its rival Nike. In the fiscal year 2004/2005, Nike's revenue totalled the equivalent of 11.2 billion euros.
adidas-Salomon AG will pay 59 dollars per Reebok share in cash, a premium of 34.2 percent over the closing price of Reebok's stock on August 2, 2005. The takeover still needs to be approved by Reebok shareholders and competition authorities. Both companies said that the takeover should be completed in the first half-year of 2006.
The merger further accelerates the adidas Group's strategic intent. Back in May this year, adidas had already announced that it was to sell its Salomon outdoor business to the Finnish Amer Sports Corporation.
The merger represented a "strategic milestone," said Herbert Hainer, adidas-Salomon Chairman and CEO. Together, they would expand their geographic reach, particularly in North America. Over the last couple of years, adidas has not been in a position to seriously challenge Nike - this could change with the takeover. Due to the tie-up with Reebok, adidas would double its North American sales to 3.1 billion euros and develop new market segments in the most popular American sports categories such as basketball, American football or hockey.
Global competition between designs and brands
With the tremendous significance that design has today for the sports goods industry, design is the crucial factor for success when it comes to linking customers to the brand or developing new target groups. Thus, competition within the industry turns into a competition between designs and brands.
adidas is an outstanding example of how a company can gain a leading position in a tough international market through the implementation of a consistent design philosophy and the creation of a professional design department. In July 2005, adidas has been honoured with the title "red dot: design team of the year" for the course that the adidas Group has taken in recent years.