(Washington Insider Magazine) – A key bidder has dropped out of the auction for Reebok, making it more likely that German-based Adidas will take an even bigger hit on its disastrous, 15-year stint as the owner of the struggling sneaker brand, The Post has learned.
As reported by The Post, Authentic Brands Group — a fast-growing licensing firm whose properties include Forever 21, Brooks Brothers and Nine West — offered about $1 billion for Reebok in the auction’s first round, teaming up with Wolverine Worldwide, the footwear maker behind Merrell shoes, Hush Puppies and Stride Rite.
But talks with New York-based ABG recently hit the rocks over Adidas’ demands that ABG operate Reebok as a standalone business, sources said. In addition to paying out fees to Adidas for at least several years through a transition services agreement, Adidas was asking ABG to avoid layoffs of Reebok employees, even as it continued to feed Adidas’ sneaker distribution networks, insiders said.
Instead, ABG’s chief executive — the prolific dealmaker Jamie Salter — had wanted to buy the rights to the Reebok name and integrate its US business with Sparc Group, its joint venture with mall giant Simon Property that runs Aeropostale, Brooks Brothers, Forever 21, Lucky Brand and Nautica. Wolverine Worldwide, meanwhile, was planning to help with sourcing manufacturing overseas.
“Adidas wants to sell Reebok with everything and wipe their hands clean,” a source close to the situation said. But ABG’s Salter “just buys brands and licenses them. There would be job losses in Europe.”
The bid from Authentic Brands — which on Wednesday filed plans to go public with the Securities and Exchange Commission — had stood to be the highest for Reebok. The money-losing label — which lately has made a run to revive its business in a tie-up with rapper Cardi B. — has also attracted bids from buyout firms Advent International, Cerberus Capital Management, CVC Capital Partners and Sycamore Partners, sources said.
Nevertheless, the auction of the 126-year-old shoe icon, which kicked off in February, will only fetch a fraction of the $3.8 billion Adidas paid for it in 2006.
The company’s steep losses — more than $100 million in a year before interest, taxes, and amortization, according to a source — mean potential buyers cannot borrow money to use toward the purchase. It has projected profits within five years under a new owner, but a source said Reebok’s revenue fell last year to $1.5 billion from $1.8 billion in 2019.
Ironically, it’s the partnership with Sparc that would have enabled ABG to pay a higher price for Reebok than rival bidders — partly because of the layoffs it would entail, sources said. Meanwhile, Wolverine is not interested in bidding without Authentic Brands, sources said.