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The world's biggest athletic

Adidas and Reebok are facing tough compition from their rival firm Nike. Nike had about 36 percent, Adidas 8.9 percent and Reebok 12.2 percent market share innthe athletic footwear market in north America. Although, Adidas holds the second position globally in sporting goods (http://management-case-studies.blogspot.com/2008/03/adidas-reebok-merger-case-study.html).The US ranks the world's biggest athletic shoe market, account for 50 percent of $ 33 billion spend globally (http://www.businessweek.com/bwdaily/dnflash/aug2005/nf2005084_8340.htm). In order to compete with Nike, which has very strong market share in North America and globally, Adidas on 3 August, 2005 announced its plan to acquire Reebok at an estimated value of €3.1 billion ($ 3.78 billion) (http://management-case-studies.blogspot.com/2008/03/adidas-reebok-merger-case-study.html). Adidas offer to pay 34.2 percent premium over last (i.e. 2 august, 2005) closing price for Reebok share. This makes the deal very favourable for Reebok, as it was also facing a tough compition from its rival firm Adidas, Nike and Puma. And its seems almost impossible to fight with their rival firms independently.

Reasons and aims of the merger:-

• Strategic:-

Adidas want to be clear no 2 (http://www.businessweek.com/bwdaily/dnflash/aug2005/nf2005084_8340.htm). Nike lead the US market as well as global market by giving a tough compition to Adidas and Reebok, which were competing for the second and third positions. Nike was the first choice of billions of people because Nike offers stylish look with quality and is famous for its fashion status, colour and combinations. While Adidas was supposed to be known for its good quality and comfort and Reebok for its stylish look or 'hip hop' brand. And therefore its seems to impossible for two brands to compete with nike independently. Onn the other hand Adidas was facing a tough competition from Puma which was the number 4 sporting- goods brand. And recently Puma had disclosed its expension plan through acquisition and entry into new sportwear categories (http://management-case-studies.blogspot.com/2008/03/adidas-reebok-merger-case-study.html).this seems to have a definite effect on Adidas and Reebok market share. Therefore, in order to compete with Nike and to Achieve more strong position in the market, Adiads and Reebok went for a friendly merger. This would help company in achieving more competitive position worldwide

• Broader portfolio of world-renowned brands:-

Adidas and Reebok together will have a more complete portfolio of brands that fulfil the need of a global customer base. The portfolio will be a combination of two brands with well-defined identities - adidas, which is known for its performance with a European based company, and Reebok, which is known for its lifestyle products. With its broad portfolio of brands, including adidas, Reebok, CCM, Rockport, TaylorMade, MAXFLI, Jofa, Greg Norman Collection and Koho, the adidas Group will be able to offer footwear, clothing and hardware products based on cutting-edge technology, trend-setting street wear and classic design (http://www.adidas-group.com/en/pressroom/archive/2005/2005_08_03a.aspx).

• A wide variety of product offering in key sports categories:-

The merger will help to have a stronger presence in American sports and a complete product offering that addresses key sports categories, including running, tennis, hockey, soccer, basketball, training, outdoor, American football and golf (http://www.adidas-group.com/en/pressroom/archive/2005/2005_08_03a.aspx).

• Stronger presence across teams, athletes, events and leagues:-

Merger will provide Group with strong presence across teams, athletes, events and leagues. This will improve the worldwide visibility of the brands. The Group's supporting contract includes many of the world's elite teams, such as Real Madrid, Milan AC, Bayern Munich and Liverpool FC, and athletes, such as David Beckham, Tracy McGrady, Yao Ming and Allen Iverson, as well as high-profile global events, such as the 2006 FIFA World CupTM and the Beijing 2008 Olympics. The Group will also have licensing relationships with the UEFA Champions LeagueTM, more than twenty National Olympic Committees and five premier sporting leagues - the NFL, NBA, NHL, MLB and MLS (http://www.adidas-group.com/en/pressroom/archive/2005/2005_08_03a.aspx).

• Enhanced R&D capabilities and cutting-edge technology:-

adidas is an award winning technology leader in the industry with the adidas innovation team having developed cutting-edge technologies. and Reebok has a very talented research and development professionals who have developed a distinguished portfolio of breakthrough product innovations, including the Pump 2.0 and DMX. With the help of both companies' R&D expertise, the new adidas Group expects to accelerate new product introductions in footwear, clothing and hardware to improve brand awareness and consumer demand across all brands (http://www.adidas-group.com/en/pressroom/archive/2005/2005_08_03a.aspx).

• Financial:-

For Adidas this deal look very beneficial and targeting that it will recover more than its cost in just three year time after the deal. And adidas expects to achieve about €125 million (U.S. $150 million) of annual cost savings in three year time,through Substantial operational synergies. In addition, the Group expects increase in revenue and profits from more complete coverage of all consumer segments (http://www.adidas-group.com/en/pressroom/archive/2005/2005_08_03a.aspx).

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