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Adidas and Reebok could benefit from proposed sale

Selling Reebok to a group of investors from Hong Kong and Abu Dhabi could be beneficial to both the brand and parent company Adidas, analysts have said.

It is understood a group of investors thought to include Jynwel Capital, a Hong Kong-based private equity firm owned by billionaires the Low family, and funds affiliated with the government of Abu Dhabi will offer to buy Reebok for €1.7bn (£1.3bn).

Shares in Adidas jumped by 8.1% when the news was widely reported earlier this week.

Anusha Couttigane, fashion retail consultant at Conlumino, said: “The problem for Reebok and Adidas is they are both well-established brands in their own right. The ownership model, which sees one well-known brand owning another, comes with the risk of cannibalisation for both. With this in mind, both brands could benefit from Reebok going independent.”

Honor Westnedge, lead retail analyst at Verdict, added: “Adidas hasn’t done enough to differentiate Reebok. The sports market is doing well, but with a lot of competition from non-specialist labels many brands are opening their own stores in order to build the profile of the individual labels. We have seen the beginning of this with the launch of Reebok Fithubs, but perhaps the investors will do more with the brand as they see its potential.”

The investor group reportedly approached Reebok’s management last year about putting together a joint venture to roll out high-end fitness brands and open additional stores in the US and internationally.

Adidas stands to make a 42% loss on Reebok if it accepts the deal, having bought Reebok for €3bn (£2.27bn) in 2006.

Adidas said in May it was considering offers for its Rockport shoe brand, which it acquired at the same time as it bought Reebok. Rockport saw sales rise 6% to €289m (£228m) in 2013.

In its most recent financial results Reebok generated sales of €712m (£563m) in the first half of 2014.

In July Adidas cut its profit forecast for the second time this year, blaming declining demand for its golf products in the US, currency pressure in Russia and marketing costs for the World Cup, which it sponsored. In a bid to revive its shares, this month Adidas announced a stock buyback of up to €1.5bn (£1.1bn).  

Jynwel was part of the investor groups that purchased New York’s Park Lane Hotel for $660m (£409m) in 2013 and EMI’s music publishing business for $2.2bn (£1.3bn) in 2012.

It is unclear which Abu Dhabi fund would partner with Jynwel should the Reebok bid succeed.

Adidas Group and Jynwel Capital declined to comment.

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