Adidas Ag · XETR:ADS
Adidas — Merger or Acquisition (August 2005)
38 slides from Adidas's merger presentation, Aug 3, 2005
Slide 1: A Winning Combination
A Winning Combination 3 August 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements The statements, analyses, and other information contained herein relating to the proposed merger and anticipated synergies, savings and financial and operating performance, including estimates for growth, trends in each of adidas’ and Reebok’s operations and financial resu
Slide 3: Agenda
Agenda A Winning Combination Overview of Reebok Creating Value Financial Highlights Closing Remarks 2
Slide 4: A Winning Combination
adidas A Winning Combination
Slide 5: A Stronger Competitive Platform
A Winning Combination A Stronger Competitive Platform A world leader in athletic footwear and apparel €8,899 million in net sales and €820 million in operating profit(1) Strong positions in three key regions Better balanced geographic sales mix New dynamic in North America 46% of Sales 35% of Sales
Slide 6: Two Well-Defined Brand Identities
A Winning Combination Two Well-Defined Brand Identities Sports performance Sports lifestyle inspired European heritage American sports 4
Slide 7: A Complete Range of Products
A Winning Combination A Complete Range of Products Soccer Running Basketball American F ootball Hockey Golf Baseball Training Out door/hiking Lif estyle Tennis 5
Slide 8: Strong Presence Across Teams, Athletes, Events and Leagues
A Winning Combination Strong Presence Across Teams, Athletes, Events and Leagues 6
Slide 9: Transaction Highlights
A Winning Combination Transaction Highlights US$59.00 in cash per Reebok share, for an offer value of €3.2bn Including net cash and minorities, total transaction value of €3.1bn Annual cost synergies estimated at ca.€125m, and substantial revenue opportunities from a more complete coverage of all co
Slide 10: Overview of Reebok
adidas Overview of Reebok
Slide 11: An American Sports Lifestyle Leader
Overview of Reebok An American Sports Lifestyle Leader Leading positions in North America Attractive brand portfolio Proven ability to capitalize on latest market trends Unique portfolio of exclusive league licenses in North America Strong operational performance 8
Slide 12: Leading Positions in North America
Overview of Reebok Leading Positions in North America Reebok 2004 Sales Breakdown Importance of the North American market By Geography By Category ● Largest market region in the world with sales in excess of US$52 billion Other ● More than 50% of global spend 8% 36% Apparel Europe North Reebok enjoy
Slide 13: Attractive Portfolio of Leading Brands
Overview of Reebok Attractive Portfolio of Leading Brands Performance Classic Street-inspired Casual Hockey Golf apparel 10
Slide 14: Proven Ability to Capitalize on Latest Trends
Overview of Reebok Proven Ability to Capitalize on Latest Trends Sport Music Technology New trends Brand identity Commercial skills 11
Slide 15: Unique Portfolio of Long Term League Licenses
Overview of Reebok Unique Portfolio of Long Term League Licenses Long term agreements with 4 professional leagues in North America Supplier of uniforms and athletic apparel to teams Licenses to manufacture and distribute replica jerseys, shorts and other apparel 12
Slide 16: Strong Operating Track Record
Overview of Reebok Strong Operating Track Record Reebok Financial Highlights (US$ Million) Strong sales growth over last several years 3,941 3,485 3,785 ● 10% CAGR 2002-04 3,128 Solid operating performance with improving margins 215 252 294 305 ● 17% operating profit CAGR 2002-04 ● LTM operating mar
Slide 17: Creating Value
adidas Creating Value
Slide 18: Six Opportunities for Value
Creating Value Six Opportunities for Value Geographies and categories Consumers and demographics Technology Licenses, teams and events Distribution channels Operating efficiencies 14
Slide 19: Widen Geographic and Category Impact
Creating Value Widen Geographic and Category Impact Idea sharing across markets and geographies Capitalize on Reebok’s skills and know-how to accelerate adidas’ position in North America Benefit from adidas’ expertise in Europe and Asia for Reebok Combine expertise in branded and licensed athletic a
Slide 20: Reach a Broader Spectrum of Consumers and Demographics
Creating Value Reach a Broader Spectrum of Consumers and Demographics Ability to identify sport / style trends ● Better product and category prioritization ● More products at more price points Continue brand developments into new segments Benefit from Reebok’s expertise in women’s segment Capitalize
Slide 21: Expand Technology Expertise Across Brands
Creating Value Expand Technology Expertise Across Brands Enhance profile as technology and innovation leader Bigger combined R&D spend More products to capitalize on R&D developments New technology development and awareness across brands ● Appl ications ● Mater ials PUMP 2.0 TECHNOLOGY 17
Slide 22: Maximize License, Team and Event Assets
Creating Value Maximize License, Team and Event Assets Transfer of skills and know-how Management of exclusive agreements Relationship with teams and athletes More active events calendar 18
Slide 23: Broaden Channel Relationships
Creating Value Broaden Channel Relationships Capitalize on adidas’ in-depth understanding of specialized sporting goods channel Benefit from Reebok’s strong insights into department store and general merchandise channels Selective channel diversification ● Expand on own retail initiatives in fast gr
Slide 24: Increase Operating Efficiencies
Creating Value Increase Operating Efficiencies Synergies Selected Initiatives ● Higher efficiency through combined sales and marketing scale Sales, Marketing & ● Better utilization of available distribution capacity Distribution 40% Admin. ● Simplify overlapping functions Services & IT ● Remove dupl
Slide 25: Expected Benefits
Creating Value Expected Benefits Annual cost synergies and operating improvements ca.€125m Operating profit impact of revenue enhancement from better coverage of all consumer segments Substantial Widen geographic and category impact Reach broader spectrum of consumers Expand technology expertise acr
Slide 26: Financial Highlights
adidas Financial Highlights
Slide 27: Reebok First Half Results – 2005 vs. 2004
Financial Highlights Reebok First Half Results – 2005 vs. 2004 Six Months Ending June 30, 2004 2005 % Change Net Sales US$1,645m US$1,801m 9.5% Gross Profit 652 729 11.8% Gross Margin 39.6% 40.4% +80bps Operating Profit 115 126 9.5% Operating Margin 7.0% 7.0% +0bps Net Income 70(1) 80 14.9% Source:
Slide 28: adidas First Half Results – 2005 vs. 2004
Financial Highlights adidas First Half Results – 2005 vs. 2004 Six Months Ending June 30, 2004 2005 % Change Net Sales €2,906m €3,189m 10% Gross Profit 1,394 1,547 11% Gross Margin 48.0% 48.5% +50bps Operating Profit 283 357 26% Operating Margin 9.7% 11.2% +150bps Net Income 163 225 39% Reported Net
Slide 29: Pro Forma Aggregate Financials – FY 2004
Financial Highlights Pro Forma Aggregate Financials – FY 2004 adidas-Salomon (1) Reebok (2) Pro Forma Net Sales €5,856m €3,043m €8,899m Gross Profit 2,812 1,204 4,016 Operating Profit 583 237 820 Source: adidas and Reebok (1) From continuing operations (2) Converted into euros at the 2004 average US
Slide 30: Medium Term Outlook
Financial Highlights Medium Term Outlook Annual cost synergies and operating improvements by FY 2008: Approximate phasing: ca.€125m Year 1: 30% Year 2: 60% Year 3: 100% Operating profit impact of revenue enhancement from better coverage of all consumer segments: Substantial 25
Slide 31: Medium Term Financial Targets
Financial Highlights Medium Term Financial Targets Mid to high single digit sales growth Gross margin of approximately 46% to 48% Operating margin greater than 11% Double digit net income growth 26
Slide 32: Transaction Value
Financial Highlights Transaction Value Price per share US$59.00 Number of diluted shares(1) 65.9m Offer value €3,183m Net cash position(2) (77) Minorities 8 Transaction value 3,114 (1) 59.8m basic shares outstanding plus dilution effect from options, warrants and convertible bond (2) As of June 30,
Slide 33: Transaction Metrics and Timing
Financial Highlights Transaction Metrics and Timing Multiples ● Transaction value / LTM Net Sales 1.00x ● Transaction value / LTM EBITDA 11.7x(1) ● Transaction value / LTM EBITDA with synergies 7.9x(1) EPS ● EPS accretive based on pro forma combined results in first full year after closing Return on
Slide 34: Transaction Metrics and Timing (Cont’d)
Financial Highlights Transaction Metrics and Timing (Cont’d) Financing ● adidas intends to finance the acquisition through a combination of debt and equity, with the objective of maintaining a strong investment grade profile Timing ● Anticipated closing during the first half of 2006 ● Special meetin
Slide 35: Closing Remarks
adidas Closing Remarks
Slide 36: Closing Remarks
Closing Remarks A unique opportunity to position adidas for the future Strong strategic fit and complementarity between adidas and Reebok Well-defined highly complementary brand identities Global leading positions in athletic apparel and footwear Strength across all sports, leagues and events Scope
Slide 37: Appendix
adidas Appendix
Slide 38: Reebok Strong Financial Performance
Appendix Reebok Strong Financial Performance Fiscal Year Ending December 31, 2002-04 2002 2003 2004 CAGR Sales US$3,128m US$3,485m US$3,785m 10.0% Gross Profit 1,198 1,338 1,498 11.8% Gross Margin 38.3% 38.4% 39.6% n.m. Operating Profit 215 252 294 16.9% Operating Margin 6.9% 7.2% 7.8% n.m. Net Inco