RAW STORY

Germany's Adidas-Salomon AG is close to buying rival Reebok International Ltd. for about $4 billion, according to people close to the situation, in what would be a big bid by two former giants of the athletic footwear industry to challenge the long-running supremacy of Nike Inc, the (paid-restricted) Wall Street Journal reports in Wednesday editions. Excerpts follow.

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Adidas is expected to pay about $59 a share for Reebok, according to one person briefed on the matter -- awarding a 34% premium over the $43.95 at which shares closed in 4 p.m. trading yesterday on the New York Stock Exchange.

Together, Adidas and Reebok would aim to widely expand their presence in the world of sneakers and other athletic apparel, which for two decades has been dominated by Nike and its ubiquitous swoosh logo. While seeing profits rise, Adidas has been restructuring and fending off competition from Nike in recent years, while Reebok, which is based in Canton, Mass., has revitalized its standing in the fashion-conscious youth market for athletic shoes and gear.

Nike, which had nearly $24 billion in sales in its most recent fiscal year, dominates the field with a combination of cutting-edge marketing and hip fashion sense. It long has expertly used endorsements from celebrity athletes, from Michael Jordan to Tiger Woods, to build cachet and market share. It also has cemented relationships with high-end boutiques by releasing limited-edition versions of popular shoes that often fetch hundreds of dollars at retail.

Combined, Adidas and Reebok could significantly close the gap on Nike's commanding U.S. market share. Nike had about 36% market share in 2004 in the U.S. athletic-footwear market, according to the Sporting Goods Manufacturers Association International, while Adidas had 8.9% of the U.S. market and Reebok had 12.2%. The U.S. is the world's biggest athletic-shoe market, accounting for half the $33 billion spent globally each year on athletic shoes.

Outside the U.S., Adidas runs neck-and-neck with Nike, and acquiring Reebok could give it an inroad particularly with Asia's growing class of fashion-conscious young people. Adidas already leads the global soccer market, but Reebok could help bolster other areas like basketball for the German company. Reebok has lined up a stable of stars like National Basketball Association players Yao Ming and Allen Iverson. That could help Adidas and Reebok compete against young Nike endorsers such as the NBA's LeBron James and Carmelo Anthony.

Originally published on Wednesday August 3, 2005.