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Adidas signs 11-year deal with NBA

Athletic shoe and apparel maker Adidas said Tuesday it signed an 11-year deal with the National Basketball Association that will make the German company the official uniform provider for the U.S. league.
/ Source: The Associated Press

Athletic shoe and apparel maker Adidas said Tuesday it signed an 11-year deal with the National Basketball Association that will make the German company the official uniform provider for the U.S. league.

The company said the deal also includes providing uniforms and other products for the Women’s National Basketball Association and the NBA Development League, starting with the 2006-2007 season.

Adidas-Salomon AG, which has been a marketing partner of the NBA since 2002, said the deal resulted from its acquisition last year of Reebok International Ltd., the NBA’s uniform and apparel provider since 2001.

The value of the deal was not immediately disclosed by Adidas or the NBA, but shares of Adidas rose nearly 1.8 percent to close at 170.49 euros ($206.44) in Frankfurt trading after it was announced.

The Reebok brand will continue to be a global marketing partner of the NBA and will keep its ability to create NBA branded footwear.

“As part of the Reebok integration, we as a group made this strategic decision, which we believe will significantly help us to immediately increase the visibility of Adidas as a sport performance brand in the U.S.,” Adidas Chairman and Chief Executive Herbert Hainer said. “In the long term, this new 11-year partnership has the power to make the NBA and Adidas synonymous in basketball.”

Official game shirts will remain free of Adidas logos, as has been the case in the past with Reebok markings, but they will appear on replica clothing and pre-game warm-up outfits.

Adidas and the NBA also plan to partner by increasing the number of Adidas products at the NBA Store in New York City.

The company said it and the league will create an in-store Adidas-NBA concept shop to serve as a prototype for future stores worldwide. Adidas will sell NBA products at its own shops, including more than 2,000 in China, the home of the Houston Rockets’ Yao Ming, who wears Reebok.

“NBA and Adidas branded apparel and footwear will be available to even more fans around the world, continuing our effort to expand the league’s accessibility to anywhere fans can dribble a ball or watch a basketball game,” NBA Commissioner David Stern said in a statement.

Erich Stamminger, president and CEO of the Adidas brand, called the deal a first step forward into breaking into new markets using basketball.

Previously, Adidas has been best known worldwide for its sponsorship of soccer.

“This partnership deepens our relationship with a sports league that continues to soar in global popularity,” Stamminger said. “We are building a foundation on which we can grow the sport of basketball globally.”

The announcement came as Adidas executives gathered in London to outline their plans for Reebok. Critics contend that Adidas could struggle to reap rewards from the $3.7 billion acquisition of Canton, Mass.-based Reebok, but officials said the acquisition was moving forward.

Speaking in London, CEO Hainer said Adidas expects sales growth in the high single-digit percentages for each of the next three years, compared with previous guidance of mid-to-high single-digit revenue growth.

Chief Financial Officer Robin Stalker said the company also expects net income to increase to about 500 million euros ($604.9 million) this year, compared with the 383 million euros it posted in 2005.

The 2006 figure takes into account the charges related to the Reebok deal, he said. Those charges should be approximately 80 million euros ($96.8 million) this year.

Hainer said the company also expects net income to increase by double-digit rates in each of the next three years, expanding by at least 20 percent in 2007.

Hainer added that the company expects annualized cost synergies from the integration of Reebok of 175 million euros ($212 million), up from an original estimate of 125 million euros ($151 million). The net impact will be realized in 2009, he said.

“We are showing terrific progress in the continued integration of Reebok and are fully confident we can leverage our combined strengths to deliver on our ambitious goals as a group,” Hainer said.

Reebok CEO Paul Harrington said his brand would try to enhance its performance in the sports market and keep ahold of its sports lifestyle segment. He said the unit would focus its long-term efforts on apparel, running shoes, women’s products and apparel for sporting leagues.

In March, Adidas reported that Reebok’s fourth-quarter orders fell 22 percent, coming off a decline in the previous quarter.

Herzogenaurach, Germany-based Adidas as a whole has seen strong growth in sales and profits. The company also is expected to benefit from this summer’s World Cup finals in Germany.

Stamminger said Adidas expects to post record soccer-related sales this year, with revenue in that area up at least 20 percent to reach an estimated 1 billion euros ($1.2 billion).

But the company still faces fierce competition from Nike Inc., the leader in athletic footwear in the U.S., which uses prominent NBA players like LeBron James as well as golfer Tiger Woods in its advertising.