After 15 years, Adidas (OTC:ADDYY) is nixing its partnership with fellow shoe brand Reebok. Authentic Brands Group will be the new owner, and it's taking on the Reebok name for a shrunken valuation.
How much did Adidas sell Reebok off for? What's Authentic Brands Group beyond its corporate name? Let's find out what's next for Reebok and its new parent company.
Adidas sells Reebok at a loss for $2.5 billion
Adidas purchased Reebok for $3.8 billion. At the time, the acquisition served as a way for Adidas to compete with its top competitor—Nike (NYSE:NKE).
Unfortunately for Adidas, Reebok lost a chunk of its value over the next decade and a half. Reebok was wildly popular in the 1980s and managed to secure $1.8 billion in sales for 1988. That was 50 percent more than Nike at the time. By the 2000s and 2010s, Reebok's annual sales were regularly on a rollercoaster ride. The sales would dip low while gradually losing momentum to go high again.
Ultimately, Adidas decided that Reebok was weighing it down. Despite the pink sheet stock's decent performance over the years, the Reebok leg of the business hasn't been prosperous. Whatever straws the brand was grasping at in 2019, they practically vaporized by the time the COVID-19 pandemic rolled around.
Unlike Reebok, Adidas was able to propel its own brand into relevance. This was largely due to the influx of capital when Reebok first became an Adidas asset. Over the years, Adidas was able to stand on its own sneakers as Reebok lost value. Given this investment, selling Reebok at a loss might not be such a downer for Adidas.
New Reebok owner Authentic Brands Group has 30+ brands
Authentic Brands Group (ABG) is a licensing firm that now owns Reebok. ABG has more than 30 brands in its portfolio. The portfolio includes major names like:
Juicy Couture (talk about a phoenix that rose from the ashes)
ABG's partnerships with Sports Illustrated, Simon Property Group Inc., and more show that this global firm holds weight.
Is Authentic Brands Group publicly traded?
ABG has been on a major acquisition streak lately, and that has increased the firm's value by a landslide. The public doesn't have access to a firm ABG valuation yet, but the most recent report came from Bloomberg and valued the company at an estimated $10 billion. Given the string of buyouts that ABG has spearheaded lately, it's possible that number has swelled.
ABG stock is coming, and it couldn't be at a smoother time
Will Reebok recover? It's too soon to say, but it's likely that ABG will pose a serious rebellion in the brand once it gets its corporate hands in.
With Reebok off its radar, Adidas will shift its focus inward and build out the core brand as much as possible. In contrast, ABG is building its web as far as it will go.