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Adidas Confirms Plan to Divest Struggling Reebok Brand

Adidas, which bought Reebok in 2006 for $3.8 billion but wrote its value down to just under $1 billion last year, will formally divest the struggling brand starting this quarter.

Adidas AG  (ADDYY)  said Tuesday that it will divest is struggling Reebok brand as it looks to close the gap on rival Nike Inc.  (NKE) - Get Nike Inc. Report in the global sport apparel market.

Following a five year review of its global operations, Adidas said it will divest Reebok, which it purchased in 2006 for $3.8 billion, and report Reebok earnings as discontinued operations starting in the first quarter of this year. The group will focus on what it calls the "further strengthening the leading position of the adidas brand in the global sporting goods market." A broader update on the group's strategy will be presented during the group's March 10 investor day, the company said. 

Germany's Manager magazin reported in October that V.F. Corporation VFC and China-based Anta Sports could be interested in purchasing the Reebok assets. 

“The long-term growth opportunities in our industry are highly attractive, particularly for iconic sports brands,” said CEO Kasper Rorsted. “After careful consideration, we have come to the conclusion that Reebok and adidas will be able to significantly better realize their growth potential independently of each other."

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"We will work diligently in the coming months to ensure a successful future for the Reebok brand and the team behind it,” he added. 

Adidas' German-listed shares were marked 1% lower in late-afternoon trading in Frankfurt following news of the Reebok sale to change hands at €294.80 each, trimming their six-month gain to around 10%.

Pareto Securities analysts argued in December that getting rid of Reebok would likely have little impact on the group's overall valuation, it would nonetheless "free (Adidas) from a business that has  overly  dragged on management's time and  consistently failed to meet targets since its 2006 purchase."