This presentation documents Adidas acquisition of Reebok.

1. Adidas/Reebok Merger October 8, 2009 Collin Shaw Kelly Truesdale Michael Rockette Benedikte Schmidt SaravananSadaiyappan

2. Key Takeaways What value does Reebok add to Adidas? How should Adidas value Reebok and with what synergies? Has the merger been a success or failure?

3. Agenda Adidas & Reebok Background Acquisition Background Industry Overview SWOT Analysis Valuation Model Synergies Integration Plan Post Integration Conclusions

4. Adidas Founded in 1926 World leader in soccer shoes #2 behind Nike worldwide - #4 in the US Three acquisitions before Reebok: Company Sports Inc in 1993 Salomon in 1997 Arc'Teryxin 2002 Culture of control, engineering, and production

5. Reebok Founded in 1895 First athletic shoe for woman #2 in US - #4 in Europe Strong sales growth from 2002-2004 Unique portfolio of long term league licenses Creative marketing-driven culture

6. Industry Overview One of the most competitive industries. Over 75% of the industry controlled by branded items. Large players – supplier power and access to shelf space. Small players – anticipating a fashion trend. Private label a threat.

7. US Footwear Market

8. Expected Trend Expected growth rate ~9% Change from “Supply Push” to “Demand Pull” model. Blurring line between sport wear and active wear. Demand for “athleisure” shoes.

9. Acquisition Background Goal: increase share in the U.S. market + better compete with Nike Stock prices improved the day of announcement Reebok sales down in fourth quarter of 2005 Deal closed on January 2006 Price: $3.52 billion

10. SWOT Analysis Strengths Weaknesses Adidas is strong in Europe, Reebok is strong in US, & Asia Complementary licenses and contracts Reduced costs for retailers Reebok is extremely strong in Women’s wear Many overlapping products Two HQ’s that will be hard to integrate Two very strong, distinct corporate cultures

11. SWOT Analysis Opportunities Threats Leverage combined R&D strengths & budgets Bring Reebok’s women’s wear to Europe Reduce costs to retailers by larger distribution networks Ability for better reaction to global trends Competition between brands employees Cannibalization of sales Realization of revenue growth synergies Adidas may treat Reebok as a second tier brand

12. Valuation Model Assumptions

13. Valuation Model

14. Synergies Geographies and Categories Consumer & Demographics 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 Reebok's in Asia Combine expertise in branded and licensed athletic apparel Ability to identify sport/style trends Better product and category prioritization More products and more price points Continue brand developments into new segments Benefit from Reebok's expertise in Women's segment Capitalize from Reebok's skills in sport lifestyle and leisure

15. Synergies – cont’d Technology Licenses, Events and Teams Enhance profile as technology leader and innovation leader Bigger combined R&D spend More products to capitalize on R&D spending New technology developments and awareness across brands Applications Materials Transfer of skills and know-how Management of exclusive agreements Relationship with teams and athletes More active events calendar

16. Synergies – cont’d Distribution Channels Operating Efficiencies Capitalize on Adidas in-depth understanding of specialized sporting goods channel Benefit from Reebok's strong insights into department store and general merchandise channel Selective Channel Diversification Expand on retail initiatives in emerging markets Sales, Marketing & Distribution 40% of Synergies Higher efficiency through combined sales and marketing scale Better utilization of available distribution capacity Admin Services & IT 40% of Synergies Simplify overlapping functions Remove Duplicative IT Functions Operations and Sourcing 20% of Synergies Greater economies of scale in global sourcing Improved warehousing facilities

17. Combined Valuation w/o Synergies

18. Combined Valuation w/ Synergies

19. Actual Acquisition Statistics Adidas paid $3.527 billion for Reebok Adidas paid $59.00 per share for all of Reebok’s shares Adidas paid a 34.2% premium which was still accretive to the P/E ratio Based on our model Adidas could have paid between $53.91 & $66.85

20. Integration Issues Management /Structure Changes New Brand CEO’s and Reebok CEO to Advisor Head Quarters to Remain Integration planning team comprised of employees from both Employee Care and Retention Mixed employee benefits HR resources to all employees Distribution Centers and Back Operations Combined many Distribution Centers and Back Operations Reebok switched from a “Bulk Pre-Order” system to “Pay-as-You-go” Consolidate Suppliers

21. Integration Issues Research & Development Combined to share both costs and technology Reduced employees and raised efficiencies Brand Imaging to Reebok as Premium Shoe New “Pay-as-You-go” system reduces retailer sales on Reebok Customize shoes through a website Increase Prices Reduce manufacturing of Classic Styles Geographies and Product Lines Increased international presence and product lines (i.e. shoes & apparel) Licenses, Events and Teams Very similar strategy for both brands but Adidas gets Reebok NBA contract

22. Post-Integration Results Management/Structure Changes Successful through speed, efficiency and cooperation Employee Care Handled as well as could be expected Distribution Centers Mixed Emotions in short term, spent money to become efficient Taking longer than anticipated R&D Successful at reaching companies goals on new products & efficiency

23. Post-Integration Results Brand Imaging Continue to face uphill battle and challenge Success is still possible in long term Geographies and Product Lines Expansion into new countries has partially offset loses in mature markets New product lines and strategies have produced mixed results Licenses, Events and Teams With little change no success or failure has been noticed

24. Did the merger work? “Our focus this year will be on getting Reebok back onto a growth track. It's going to take time, but we're moving in the right direction.” - Herbert Hainer, Adidas Chief Executive in 2007 Gross margins dropped 3.6% in 2007. Sales and order back log of Reebok declined. The whole group still made money.

25. What went wrong? Misperception among Retail Partners about the future of Reebok’s brand strategy Questions about the German – American Corporate Culture. Underestimation of competition from Nike.

26. What’s happening now? In 2008, Adidas put in an extra $50 million to bring back Reebok on track. Started realizing some of the synergies in late 2008 but on a lower scale than estimated.

27. Q&A