An "unsolicited bid" from a consortium of investors from Hong Kong and Abu Dhabi looking to buy Reebok from adidas could put adidas Chair & CEO Herbert Hainer into an "unaccustomed position: Having to react to investors," according to Ellen Jervell of the WALL STREET JOURNAL. Analysts said that Hainer may now "need to decide whether to cash in on a nascent recovery at Reebok or double down on a more pronounced rebound." Hainer "faces growing impatience from investors" following a "slide in Adidas’s share price of roughly 40% this year after three profit warnings." However, Hainer has said that he would "continue executing the company's current turnaround plan." Jervell notes adidas earlier this month "launched" a $1.9B (all figures U.S.) share buyback. Some analysts said that the offer price of $2.2B would be "fair for Reebok, but questioned if Adidas would take it, in part because of doubts about what the company would do with so much cash." Analysts also said that the Reebok offer "might not compensate for the logistical inefficiencies of warehouse capacity and purchasing scale that Adidas could face in the U.S. as a much smaller operation without Reebok." The possible Reebok bid "echoes the recent wave of corporate spinoffs and comes weeks after rumors that activist investors would press Adidas on its underperforming brands, which include Rockport, Reebok and TaylorMade Golf" (WALL STREET JOURNAL, 10/21). Meanwhile, in Boston, Taryn Luna cites a source as saying Hong Kong-based private-equity investor Jynwel Capital "intends to keep the company in Canton [Mass.], retain senior executives, and add jobs." The source said that the bidders "approve of Reebok’s strategy to return to its fitness roots and want to invest more in its business" (BOSTON GLOBE, 10/21).
NOT FOR SALE? In Boston, Donna Goodison reports many analysts say that adidas is "likely to spurn" the offer. New Jersey-based Susquehanna Int'l Group analyst Christopher Svezia said, "Management has previously denied a sale and will likely do [so] again during November’s ... earnings call." SportsOneSource analyst Matt Powell said of Reebok, "They’re finally on the right conceptual track with the focus on fitness, but it will take several years for this to really play itself out." Svezia added, "Strategically, we don't believe Adidas will give up its efforts yet, given these early green shoots. A sale of Rockport should remain the focus" (BOSTON HERALD, 10/21). But in N.Y., Olaf Storbeck wrote of adidas, "Unwinding the ill-fated acquisition of Reebok could offer a much-needed new start." Reebok has "never lived up to expectations" after being purchased in '06 for an "overpriced" $3.8B. adidas initially "suffered disappointing synergies and falling sales from the business." adidas’ "temptation will be to cling onto it," but if Hainer can "get an auction going, that might start to alleviate the shares’ terrible underperformance this year" (NYTIMES.com, 10/20).
