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In a deal that caught retailers, analysts and competitors by surprise, Adidas-Salomon confirmed Wednesday that it will buy Reebok International for $3.8 billion in cash, creating an athletic giant to challenge Nike with more than $11 billion in sales and making the already wealthy Paul Fireman, chairman and chief executive of Reebok, even richer. Fireman and his wife own about 17 percent of Reebok's stock, meaning they would get almost $600 million just in share sales from the deal.
Fireman told WWD Wednesday that he will stay with the new company through the acquisition and then take on a different, more strategic role in the company and a successor from within will take over day-to-day operations.
"It wasn't an easy decision. I don't know if it will be harder to sell or harder later on to leave," he said in a phone interview about the sale, although he gave no time frame on when he might depart.
The acquisition immediately closes the gap between Adidas and Nike, which has sales of $13.7 billion, and solves the German company's long-running problem of how to grow in the American market. It also is expected to help Adidas and Reebok grow their apparel businesses, seen as a key to further expansion and an area on which both have placed an increased emphasis in recent seasons. Adidas has agreements with designers Stella McCartney and Yohji Yamamoto, as well as Missy Elliott, while Reebok works with stars such as Jay-Z and has apparel licenses for key sports leagues.
By acquiring Reebok, Adidas would almost double its sales in the U.S. Last year, Adidas had a volume of about $1.9 billion in the U.S., while Reebok's domestic sales were $1.6 billion.
The deal is valued at $3.8 billion, including the assumption of net cash of $84 million. The combined company will have revenues of about $11.1 billion. Under the terms of the deal, Adidas will pay $59 a share for all of Reebok's outstanding stock, a premium of 34.2 percent on Tuesday's closing price. Reebok shares soared 30 percent on the news, to close at $57.14, a 52-week high.