Adidas-Salomon to combine with Reebok

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Adidas-Salomon to combine with Reebok and create €9 billion footprint in global athletic footwear, apparel and hardware markets :

Adidas-Salomon to combine with Reebok and create €9 billion footprint in global athletic footwear, apparel and hardware markets

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3rd August 2005 The transaction value is approximately (U.S. $3.8 billion) .Merger will gives the adidas about 22% of the U.S. shoe market, compared with Nike's 36% The combination of adidas and Reebok accelerates the adidas Group’s strategic intent in the global athletic footwear, apparel and hardware markets. Merger will provide more competitive platform worldwide, with well-defined and complementary brand identities, a wider range of products, and an even stronger presence across teams, athletes, events and leagues.

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“We want to grow both brands together faster than the individual brands and of course, grow faster than our competitors." - Herbert Hainer, Chief Executive Officer, Adidas, in 2005 .

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"With Adidas, we are able to offer an enabled portfolio of global brands that truly addresses the needs of today's and tomorrow's consumers." - Paul Fireman, Chief Executive Officer, Reebok, in 2005. .

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Click to edit Master text styles Second level Third level Fourth level Fifth level Two Well-Defined Brand Identities Sports performance European heritage Sports lifestyle inspired American sports

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This is merger represents an opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry. adidas-Salomon and Reebok represents energetic and growing companies with a shared commitment to innovat e , sport performance and sport lifestyle. Merger will expand the geographic reach, particularly in North America, and create a footwear, apparel offering zone that addresses a broader spectrum of consumers and demographics.

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Reebok - “With adidas, we are able to offer an enhanced portfolio of global brands that truly addresses the needs of today’s and tomorrow’s consumers. adidas’s mission with Reebok get accomplished that is to be the leading sports brand in the world with a focus on performance and international presence. Merger will enable the Group to generate substantial cost savings as well as incremental revenue and profits from more complete coverage of all consumer segments.

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A Complete Range of Products Soccer Running Basketball American Football Hockey Golf Baseball Training Outdoor/hiking Lifestyle Tennis

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Strong Presence Across Teams, Athletes, Events and Leagues 6

About adidas Salomon AG :

About adidas Salomon AG Based in Herzogenaurach, Germany, adidas-Salomon is the second largest sporting goods company in the world with its core brands adidas and TaylorMade–adidas Golf. T he adidas Group had 14,217 employees and reached sales of €5.9 billion in 2004. The Group’s net income attributable to shareholders from operations reached €314 million in 2004.

About Reebok International Ltd.:

Reebok International Ltd. (NYSE: RBK), headquartered in Canton, MA, is a leading worldwide designer, marketer and distributor of sports, fitness and casual footwear, apparel and equipment under the Reebok, Rockport, CCM, Jofa, Koho and Greg Norman brands. Sales for 2004 totale approximately $3.8 billion. About Reebok International Ltd.

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Leading Positions in North America Importance of the North American market Largest market region in the world with sales in excess of US$52 billion More than 50% of global spend Reebok enjoys leading positions in North American team sports Women’s Source: Reebok, Profound Data Survey and SGMA International (1) Includes the Reebok brand’s Canadian business Reebok 2004 Sales Breakdown Footwear Apparel By Geography By Category (1)

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10 Attractive Portfolio of Leading Brands Performance Classic Street-inspired Casual Hockey Golf apparel

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Proven Ability to Capitalize on Latest Trends Technology Sport Music New trends Brand identity Commercial skills

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Strong Operating Track Record 13 Strong sales growth over last several years 10% CAGR 2002-04 Solid operating performance with improving margins 17% operating profit CAGR 2002-04 LTM operating margin of 7.7% Reebok Financial Highlights (US$ Million) Net Sales Operating Profit Source: Reebok Note: Graph reflects adjusted scale

alike in many ways…:

Both the companies had a reputation of using cutting-edge technologies to produce innovative products and both had eminent brand ambassadors from the sports and entertainment worlds. The merger would help spreading the global appeal of the brands in places where they had not made a mark as individual brands alike in many ways…

Strategic Benefits:

Strategic Benefits C omplementary nature of the two businesses in various geographies, products and consumer segments provides a significant opportunity for increased value creation. Reebok complements adidas’s international profile and enhances adidas’s strong position in North America. North America represents approximately 50% of the global sporting goods market, and with Reebok, the adidas Group’s North American sales will more than double .

Strategic Benefits:

Strategic Benefits C omplementary nature of the two businesses in various geographies, products and consumer segments provides a significant opportunity for increased value creation. Reebok complements adidas’s international profile and enhances adidas’s strong position in North America. North America represents approximately 50% of the global sporting goods market, and with Reebok, the adidas Group’s North American sales will more than double .

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Six Opportunities for Value Consumers and demographics Geographies and categories Technology Licenses, teams and events Distribution channels Operating efficiencies

Strategic Benefits:

In Europe and Asia,adidas enjoys stronger brand recognition, and has significant marketing expertise and insights. adidas expects to use this expertise to further develop Reebok’s global presence. adidas-Salomon and Reebok bring an exceptional team of talented and experienced employees to the new group. Strategic Benefits

Strategic Benefits:

Broader portfolio of world-renowned brands , will allow new company to have a more complete portfolio of brands that caters to a global consumer base. - adidas , a leader in sports performance with a European heritage, - and Reebok , an American leader in sports and lifestyle products. Strategic Benefits

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Widen Geographic and Category Impact Idea sharing across markets and geographies Capitalize on Reebok’s skills and know-how to accelerate adidas’ position in North America Benefit from adidas’ expertise in Europe and Asia for Reebok Combine expertise in branded and licensed athletic apparel

Strategic Benefits:

C ombined Group’s strong presence across teams, athletes, events and leagues will enable it to substantially increase the worldwide visibility of its brands. Enhanced R&D capabilities and cutting-edge technology. adidas_1, the first “intelligent running shoe,” ClimaCool TM Reebok the Pump 2.0 and DMX. Strategic Benefits

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Reach a Broader Spectrum of Consumers and Demographics Ability to identify sport / style trends Better product and category prioritization More products at more price points Continue brand developments into new segments Benefit from Reebok’s expertise in women’s segment Capitalize on Reebok’s skills in sport lifestyle and leisure

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Expand Technology Expertise Across Brands Enhance profile as technology and innovation leader Bigger combined R&D spend More products to capitalize on R&D developments New technology development and awareness across brands Applications Materials PUMP 2.0 TECHNOLOGY

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Broaden Channel Relationships Capitalize on adidas’ in-depth understanding of specialized sporting goods channel Benefit from Reebok’s strong insights into department store and general merchandise channels Selective channel diversification Expand on own retail initiatives in fast growing markets

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Increase Operating Efficiencies Operations & Sourcing 20% Sales, Marketing & Distribution 40% Admin. Services & IT 40% Higher efficiency through combined sales and marketing scale Better utilization of available distribution capacity Greater economies of scale in global sourcing Improve warehousing facilities Simplify overlapping functions Remove duplicative IT systems Synergies Selected Initiatives

Financial Benefits:

The transaction is expected to generate a return in excess of cost of capital in the third full year after closing. The combined Group’s financial strength will enable to reduce debt and continue funding the Group’s established growth initiatives - operating cash flow. Financial Benefits

Financial Benefits:

O perational synergies to achieve approximately (U.S. $150 million) of annual cost savings by the third year after closing. T he Group expects incremental revenue and profits from more complete coverage of all consumer segments. adidas-Salomon AG intends to finance the acquisition through a combination of debt maintaining a strong investment grade profile. Financial Benefits

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A Strong Worldwide Designer, Marketer and Distributor of Sports, Fitness and Casual Footwear, Apparel and Equipment. World’s largest designer, manufacturer and marketer of hockey equipment and related apparel (including Rbk Hockey) A global player reaching all continents Powerful presence in American sports Strong positioning in the UK Growing presence in Continental Europe, Asia and Latin America Reebok Strengths

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Source: Reebok (1) Net income adjusted for special charges (after-tax) of US$0.3m in 2002, US$7.0m loss from early redemption of debentures and US$12.0m one-time tax benefit in 2004 Reebok Strong Financial Performance

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Reebok First Half Results – 2005 vs. 2004 Source: Reebok (1) Net income adjusted for a one-time after-tax US$7.0m loss from early redemption of debentures

Adidas Strengths:

• adidas-Salomon is a global leader in the sporting goods industry with the adidas and TaylorMade brands • adidas Core focus is on athletic footwear and apparel market as well as growing golf category • Unique consumer group oriented structure of adidas as a source of competitive advantage • Design and innovation leadership supported by strategic partnership with sport, style and event icons Adidas Strengths

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adidas First Half Results – 2005 vs. 2004 Source: adidas Note: Financials from continuing operations except Reported Net Income

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Expected Benefits Annual cost synergies and operating improvements Operating profit impact of revenue enhancement from better coverage of all consumer segments ca.€125m Substantial Reach broader spectrum of consumers Widen geographic and category impact Expand technology expertise across brands Maximize license, team and event assets Broaden channel relationships Increase operating efficiencies

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Source: adidas and Reebok (1) From continuing operations (2) Converted into euros at the 2004 average US$/€ exchange rate of 1.244 Pro Forma Aggregate Financials – FY 2004

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Medium Term Outlook Annual cost synergies and operating improvements by FY 2008: Approximate phasing: Year 1: 30% Year 2: 60% Year 3: 100% Operating profit impact of revenue enhancement from better coverage of all consumer segments: ca.€125m Substantial

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Medium Term Financial Targets Mid to high single digit sales growth Gross margin of approximately 46% to 48% Operating margin greater than 11% Double digit net income growth

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A unique opportunity to position adidas for the future Strong strategic fit and complementarily between adidas and Reebok Well-defined highly complementary brand identities Global leading positions in athletic apparel and footwear Strength across all sports, leagues and events Scope for significant value creation

?????.......:

• Some analysts believe that the merger would not generate much synergy because the individual brand identities which are to be maintained even after the merger. Analysts also doubted the effectiveness of the merger, as a strategy to beat Nike. They felt that the combined entity would have to work really hard to further expand its market share in the US market and globally. ?????.......

Exercise:

• THE SPORTING GOODS INDUSTRY TABLE I COMPARATIVE POSITION IN 2004 THE MERGER THE SYNERGIES GEOGRAPHIC SALES COMPARISON OF ADIDAS AND REEBOK FOR 2004 INTEGRATION ISSUES THE TRACK AHEAD SHARE PRICE MOVEMENT OF ADIDAS-SALOMON AG, AUGUST 2005 PRODUCT PROFILE OF ADIDAS-SALOMON AG FINANCIAL SUMMARY OF ADIDAS FINANCIAL SUMMARY OF REEBOK PRODUCT PROFILE OF REEBOK INTERNATIONAL LIMITED CORPORATE MISSION OF ADIDAS FINANCIAL SUMMARY OF NIKE TOP SPONSORSHIP DEALS OF ADIDAS, REEBOK AND NIKE THE SWOOSH LOGO OF NIKE Exercise

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Thanx !

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