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01-18-2006, 11:16 AM
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Adidas could clear last Reebok hurdles next week By Ulf Laessing
Wed Jan 18, 7:49 AM ET
German sporting goods firm Adidas is expected to clear next week the last major hurdles for the biggest takeover of its history -- the planned $3.8 billion acquisition of U.S. rival Reebok.
The Bavarian firm, the world's second largest maker of sporting goods, in August unveiled ambitious plans to zero in on industry leader Nike by buying number three Reebok.
Next Tuesday, the routine one-month antitrust review of the European Commission ends, a long-awaited step toward closing the deal.
Analysts expect Brussels to approve the transaction without launching a longer review. U.S. antitrust authorities have already okayed the takeover, which will create a firm with combined annual sales of around $11 billion.
"I don't expect any problems because both firms have a much larger combined dominance in North America than in Europe where Reebok is weak," said LRP analyst Christian Schindler.
With the takeover, Adidas hopes to increase its market share in the United States, where it has failed to pose any serious competition to Nike. Reebok has a much stronger position there due to key license sponsoring agreements with U.S. sports leagues.
Just a day after the Commission's review period ends, Reebok shareholders will decide at an extraordinary general meeting (EGM) on the acquisition. Reebok said in a regulatory filing on Friday the takeover could be concluded by January 31.
Adidas has said it would buy all outstanding Reebok shares for $59 each after Reebok's board agreed to the deal.
"Reebok shareholders will say yes because they'll never get such a good offer again after the firm recently reported weak sales," said an analyst, who declined to be identified.
Reebok shares came under pressure after it posted an 11 percent decline in third-quarter sales but have rebounded to levels at around Adidas' offer of $59 as investors anticipate an approval.
IMPROVED MOOD
In the past few weeks, investors have become more upbeat on the takeover, which originally caused concern Adidas would be tackling a tough integration at a time when it is ramping up sales campaigns for the soccer World Cup in Germany this summer.
Adidas has allayed some of those fears with forecasts the deal will boost earnings by a double-digit percentage rate in the medium term by complementing the strength in its classic three-striped sportswear with Reebok's successful lifestyle clothing.
"I think Adidas can pull it off," said Joerg Dehning, a fund manager at Activest which owns Adidas shares.
Adidas shares have gained 13 percent since the deal was announced in August, helped by a 28 percent rise in third-quarter net income, regaining ground after initially falling.
Fifteen analysts out of 22 tracked by Reuters Estimates have a "buy" or "outperform" rating on the stock, while six have a "hold" and just one analyst an "underperform" rating.
"Although the acquisition does involve risks, we believe the historical achievements of Adidas' management permit us to give the company the benefit of the doubt that it will again be successful in managing these risks," Cheuvreux analysts said in a note.
Adidas could clear last Reebok hurdles next week By Ulf Laessing
Wed Jan 18, 7:49 AM ET
German sporting goods firm Adidas is expected to clear next week the last major hurdles for the biggest takeover of its history -- the planned $3.8 billion acquisition of U.S. rival Reebok.
The Bavarian firm, the world's second largest maker of sporting goods, in August unveiled ambitious plans to zero in on industry leader Nike by buying number three Reebok.
Next Tuesday, the routine one-month antitrust review of the European Commission ends, a long-awaited step toward closing the deal.
Analysts expect Brussels to approve the transaction without launching a longer review. U.S. antitrust authorities have already okayed the takeover, which will create a firm with combined annual sales of around $11 billion.
"I don't expect any problems because both firms have a much larger combined dominance in North America than in Europe where Reebok is weak," said LRP analyst Christian Schindler.
With the takeover, Adidas hopes to increase its market share in the United States, where it has failed to pose any serious competition to Nike. Reebok has a much stronger position there due to key license sponsoring agreements with U.S. sports leagues.
Just a day after the Commission's review period ends, Reebok shareholders will decide at an extraordinary general meeting (EGM) on the acquisition. Reebok said in a regulatory filing on Friday the takeover could be concluded by January 31.
Adidas has said it would buy all outstanding Reebok shares for $59 each after Reebok's board agreed to the deal.
"Reebok shareholders will say yes because they'll never get such a good offer again after the firm recently reported weak sales," said an analyst, who declined to be identified.
Reebok shares came under pressure after it posted an 11 percent decline in third-quarter sales but have rebounded to levels at around Adidas' offer of $59 as investors anticipate an approval.
IMPROVED MOOD
In the past few weeks, investors have become more upbeat on the takeover, which originally caused concern Adidas would be tackling a tough integration at a time when it is ramping up sales campaigns for the soccer World Cup in Germany this summer.
Adidas has allayed some of those fears with forecasts the deal will boost earnings by a double-digit percentage rate in the medium term by complementing the strength in its classic three-striped sportswear with Reebok's successful lifestyle clothing.
"I think Adidas can pull it off," said Joerg Dehning, a fund manager at Activest which owns Adidas shares.
Adidas shares have gained 13 percent since the deal was announced in August, helped by a 28 percent rise in third-quarter net income, regaining ground after initially falling.
Fifteen analysts out of 22 tracked by Reuters Estimates have a "buy" or "outperform" rating on the stock, while six have a "hold" and just one analyst an "underperform" rating.
"Although the acquisition does involve risks, we believe the historical achievements of Adidas' management permit us to give the company the benefit of the doubt that it will again be successful in managing these risks," Cheuvreux analysts said in a note.