NEW YORK, Oct 20:
An investor group that includes Jynwel Capital and funds affiliated with the Abu Dhabi government is launching a bid to buy Reebok from Adidas AG for about US$2.2 billion (RM7.2 billion), the Wall Street Journal reported yesterday.
Jynwel Capital, a Hong Kong-based private equity investment and advisory firm run by Jho Low, and the Abu Dhabi government-affiliated funds planned to make the offer imminently in a letter to Adidas directors, the Journal reported, citing unnamed sources close to the matter.
The investors are expected to argue that Reebok would do better if it were managed independently, the Journal reported, as the eight-year-old marriage of sneaker makers has shown disappointing results.
Adidas spokespeople did not immediately return emailed requests for comment. A Jynwel Capital spokesperson said, “We continually evaluate unique investment opportunities globally but we don’t comment on rumours or speculation.”
The investors believe Reebok would benefit from management and ownership that would be better able to focus on improving Reebok’s business in the US outside the scrutiny of public shareholders, but want to maintain Reebok’s current strategic path and keep its top executives, the Journal reported, citing unnamed sources close to the bidders.
The investor group also wants to give Reebok more financing for marketing and store rollouts, the Journal reported, citing the sources.
The group first approached Reebok’s management late last year about establishing a joint venture to roll out high-end fitness brands and build dozens of stores in the US and internationally, the Journal reported.
The investor group later decided to make a bid for the entire Reebok business as the discussions progressed, the Journal reported.
It is unclear which Abu Dhabi fund would partner with Jynwel should the Reebok bid succeed, nor how receptive Adidas might be to the bid, the Journal reported.
There is also no assurance the bid would be successful, the Journal reported.
Germany’s Adidas, the world’s second largest sports apparel firm, bought the US-headquartered Reebok in August 2005 for US$3.8 billion. It enjoyed initial success with a range of toning shoes, but has since struggled.
Adidas and Reebok ranked second and third in US footwear in retail-market share in 2005, 10% and 8% respectively, according to SportsOneSource. Adidas’ share has fallen to 6% this year, with Reebok’s down to 1.8%.
“There’s always been this complaint around Adidas that it didn’t make products that were appropriate for the US market, and instead tried to impose a world-wide product line on the US,” said SportsOneSource analyst Matt Powell.
Adidas has shrunk Reebok through asset sales and other deals. In 2006, it sold the Greg Norman Collection, a brand of golf apparel. It’s also seeking to sell Rockport, a maker of boat and dress shoes.
Adidas also took over Reebok’s sponsorship contract with the National Basketball Association, and Reebok didn’t renew its sponsorship deal with the National Football League.
Recently Adidas has worked to reposition Reebok as a fitness brand, and it has struck partnership deals with CrossFit and others.
The Reebok brand is showing signs of a turnaround, Ingbert Faust, an analyst at Equinet Bank in Germany, said in a research note.
The bidding consortium first approached Reebok’s management late last year about putting together a joint venture to roll out high-end fitness brands and build dozens of additional stores in the US and internationally.
As those discussions progressed, the consortium’s ambitions for the deal grew, the people said. By the summer, the group had decided to make a bid for the entire business.
Jynwel Capital is the investment arm of the Low family’s third generation co-founded by Szen Low and Jho Low.
The Wall Street Journal’s research had indicated the Low family at an estimated US$1.75 billion net-worth.
This was generated from low profile billionaire entrepreneur Low Meng Tak who created substantial wealth since the 1940’s in mining and liquor businesses across Asia with substantial businesses in China and other parts of Asia.
Jho Low and Jynwel Capital are no stranger to big merger deals having being involved in the US$2.2 billion leveraged buyout of EMI Music Publishing with global blue-chip investment firm The Blackstone Group, Sony Corporation and Abu Dhabi government investment firm Mubadala.
Jynwel Capital has also expanded the Low family mining business from Asia to an international scale with its investment in Electrum Group jointly with state investment fund Kuwait Investment Authority.