German manufacturer Adidas is making an aggressive pitch to topple Nike from the top of the world sportswear league, even if it has to plunder its newly acquired former competitor Reebok to achieve its goal.
Adidas wants to be at the top of the league, even if it comes at Reebok's expense
Adidas said on Tuesday it would replace Reebok as the supplier of team apparel for the National Basketball Association (NBA) in the United States and the WNBA women's league from next season and for the next 11 years.
"If we want to lead around the world, we have to lead in basketball," chief executive of the Adidas brand, Erich Stamminger, told a press conference in London to announce the deal. Adidas will also have the lucrative right to market replica jerseys in the United States, Canada, Europe and Asia.
The deal is a major move by Adidas, which has struggled to establish itself in the US market where it currently has a 20 percent share, but deprives Reebok of one of the pillars of its business.
Aiming for the top spot
Adidas is aiming to overtake US giant Nike, the uncontested number one in the sportswear market in the United States. The announcement on Tuesday provided an early snapshot of the strategy of the newly merged company just three months after Adidas acquired Reebok in a four-billion-euro ($4.8 billion) deal finalized in January.
Adidas is making the new jersey for Germany's national soccer team
Adidas will concentrate on team sports, leaving Reebok activities such as aerobics, gym wear and running apparel.
"We retain the footwear rights and the ability to market our athletes," said chief executive Paul Harrington, referring to the agreement to allow Reebok to continue marketing NBA-branded basketball shoes.
"It has never been a more exciting time," he insisted.
Changes at Reebok
The message from its new parent company was that Reebok needed an overhaul, however.
"Reebok has its challenges and they will need to be fixed and fixed quickly," said Adidas CEO Herbert Hainer.
Plans are to merge some Adidas and Reebok administrative departments
Reebok sales dipped sharply at the end of 2005, with many retailers worried about the prospects of the imminent merger with Adidas. As a result, Adidas appears to have decided to integrate its new subsidiary as quickly as possible.
"The planning is over and we are moving very fast to realize the savings," said Adidas chief financial officer Robin Stalker, adding that he was working to an "aggressive timetable."
Adidas has raised its predictions of savings from the merger by 50 million euros a year to 175 million euros, although those savings will not be seen until 2009.
They will be made by merging the companies' administrative and financial departments as well as unifying their IT operations and commercial departments.
The savings will also involve cutting 500 jobs from the administrative staff, Hainer said, although he added that he believed an equal number of jobs would be created over the next two to three years.