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Reebok

Reebok and Adidas: A Good Fit
Their merger could put the combined outfit on the fast track. Then again, Nike may still prove to agile to catch

It makes too much sense not to happen. A combination of Reebok International (RBK ) and Adidas-Salomon AG (ADDYY ), announced Aug. 3 by the two companies, is one of those mergers with which it's difficult to find fault.  

Germany's Adidas-Salomon agreed to buy Reebok International for 3.1 billion euros ($3.78 billion), or $59 a share -- a 34% premium over the $43.95 at which its shares closed the day before the announcement. Adidas has a market capitalization of about $8.4 billion, and reported net income of $423 million last year on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion.

GROWING SHADOW.   The objective of the tieup is clear. The two companies, which jockey for No. 2 and No. 3 slots behind Nike (NKE ), view their prospects for competing against the Beaverton, Ore., behemoth as better together than apart.

In Europe especially, the shadow of Nike grew larger in the last year as the U.S. company surpassed Adidas in the soccer shoe segment for the first time -- for Adidas, a game-changing event equal to, say, Toyota (TM ) surpassing Ford (F ) in U.S. sales.

In the U.S., Nike reigns supreme. In 2004, it had about 36% market share in the athletic-footwear market, according to the Sporting Goods Manufacturers Association International, while Adidas has 8.9% of the U.S. market and Reebok 12.2%. The U.S. ranks as the world's biggest athletic-shoe market, accounting for half the $33 billion spent globally each year on athletic shoes.

SURGING STOCK.   "North America is the market where you have to be," says Adidas Chief Executive Herbert Hainer. "We will expand our geographic reach, particularly in North America, and create a footwear, apparel, and hardware offering that addresses a broader spectrum of consumers and demographics."

Hainer has said that Adidas...