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Adidas-Salomon & Reebok BOD declares agreement to create €9 bn

03 Aug '05

8 min read

By harnessing both companies' R&D expertise, the new adidas Group expects to accelerate new product introductions in footwear, apparel and hardware to help drive increased brand awareness and consumer demand across all brands.

Financial

• Accretive to earnings. adidas expects the transaction to be accretive to the Group's earnings per share in the first full year after closing.

• Return in excess of cost of capital. The transaction is expected to generate a return in excess of cost of capital in the third full year after closing.

• Strong operating cash flow. With aggregate 2004 pro forma cash flow of approximately
€671 million (U.S. $835 million), adidas expects the combined Group's financial strength to enable it to reduce debt and continue funding the Group's established growth initiatives.

• Substantial operational synergies. adidas expects to achieve approximately €125 million
(U.S. $150 million) of annual cost savings by the third year after closing. In addition, the Group expects incremental revenue and profits from more complete coverage of all consumer segments.

Financing and Capital Structure

adidas-Salomon AG intends to finance the acquisition through a combination of debt and equity, with the objective of maintaining a strong investment grade profile.

Management and Headquarters

The structure of the combined Group has been agreed to secure a rapid delivery of the strategic and financial benefits created by the transaction. adidas will maintain its corporate headquarters in Herzogenaurach and its North American adidas headquarters in Portland, Oregon. Fireman will remain as Chief Executive Officer of Reebok International Ltd. and will continue to lead the Reebok team. Reebok will continue to operate under its name and will retain its headquarters in Canton, Massachusetts. This transaction is about growing the combined entity, and adidas-Salomon does not anticipate significant workforce reductions.

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