Aditya Birla Fashion will now sell Reebok products in 11 Asian countries — and it may reap benefits soon
DLF Mall of India
- ABFRL has exclusive rights to distribute and sell
Reebokproducts through wholesale, ecommerce and retail stores.
- In 2006, Reebok in India was bigger than Nike, Adidas and Puma.
- Aditya Birla Fashion and Retail is guaranteed to make returns on this investment, says Edelweiss
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As part of the agreement, Aditya Birla Fashion and Retail would get exclusive rights to distribute and sell Reebok products through wholesale, ecommerce and Reebok-branded retail stores in India and ASEAN countries.
ASEAN includes ten Southeast Asian countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The Indian company — which sits on a market cap of ₹26,470.75 (nearly $3.5 billion), as on December 16 — will pay a consideration of ₹8,000 crore to ₹10,000 crore towards purchase of inventory and other current assets as well as liabilities.
According to Edelweiss’ latest report, Aditya Birla Fashion and Retail is guaranteed to make returns on this investment as Reebok has reported a profit after tax (PAT) of ₹5,000 crore globally between fiscal year 2018 and 2020.
Germany’s Adidas had bought Reebok back in 2006, at the time when Reebok was leading the Indian sportswear market. However, Reebok has been struggling over the past few years and other sports-wear brands — Adidas, Puma and Nike — are clocking higher revenue.
Keeping this in mind, Adidas decided to sell the brand to Authentic Brands Group (ABG) and the transaction is expected to close in the first quarter of 2022. ABG has now signed a licensing deal with Aditya Birla Fashion and Retail to sell products in India and other ASEAN countries.
Authentic Brands Group (ABG) — a global brand development, marketing and entertainment company that owns Reebok — noted that the partnership will further boost its global Reebok strategy of assembling a network of core operating partners.
Ashish Dikshit, managing director at ABFRL, said, “In partnership with ABG, we plan to accelerate Reebok’s business in India, combining its global appeal and salience amongst Indian youth. This transaction further strengthens the ABFRL portfolio and increases our ability to engage with consumers across various need spaces.”
“A successful Reebok revival can add significant value to ABFRL in the backdrop of sector tailwinds. The key aspect though is the focus/team that ABFRL can put in place to drive the turnaround,” a report by Edelweiss said, while maintaining its ‘buy’ call for Aditya Birla Fashion and Retail shares at a trigger point of ₹337.
Aditya Birla Fashion and Retail will partner with Reebok Design Group (RDG) — the newly-established global brand hub based in Boston — on all product design, development, innovation and creative direction to drive a unified brand voice and vision.
The proposed transaction is subject to the successful completion of due diligence, necessary statutory approvals and signing of definitive agreements.
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