The German athletic brand, which had said it was owed about $54 million by bankrupt Rockport, stands to collect $8 million, according to a court-approved settlement reached on Monday. (Rockport will pay Adidas the sum from the proceeds of the bankruptcy sale.)
In court documents filed on June 28, Adidas — which owned Rockport until 2015 — objected to Rockport’s proposed bankruptcy sale to CB Marathon Opco, LLC, an affiliate of Charlesbank Capital Partners, LLC, alleging the transaction would shortchange the brand’s former owner by millions of dollars.
“Adidas and its subsidiary Reebok are former owners of the Rockport business and two of the largest unsecured creditors of [Rockport] and their affiliates,” Adidas stated in June legal papers. “The sale of the Rockport business in 2015 required Adidas to facilitate a post-closing transition of operations in foreign markets to the new owner in exchange for the recovery of a variety of costs and lost benefits.” (When Rockport filed for Chapter 11, it said Adidas and Reebok held the No. 2 and No. 3 largest unsecured claims at $58 million and 12.5 million, respectively.)
Adidas’ objection to the bankruptcy sale had marked the latest battle in an ongoing saga between Rockport and its former parent company. Previously family-owned, Rockport — founded in 1971 in West Newton, Mass. — came under Reebok’s ownership in 1986. Reebok and its subsidiaries were purchased by Adidas in 2005. In early 2015, New Balance Holding and Boston-based Berkshire Partners LLC bought Rockport from Adidas for an estimated $280 million.
When Rockport filed bankruptcy in May, in a court declaration, its interim CFO Paul Kosturos claimed that a “costly and time-consuming separation” from Adidas was among the key factors contributing to the shoemaker’s need to seek Chapter 11 protection.
“Separation of the [Rockport Group’s] operations from the Adidas Networks was not completed until November 2017 and proved to be more complex, took meaningfully longer and was significantly more expensive than planned,” Kosturos told the court on May 14. “In addition, [Rockport] encountered operational challenges during the initial development of [its] own logistics network that negatively impacted revenue.”
Meanwhile, Adidas had claimed that Rockport and its affiliates were liable “for no less than $54 million in obligations,” owed in connection with the post-closing transition.
“Following [the divestiture and] transition, which took over two years to complete, it became clear that Rockport was unwilling to hold up its end of the bargain,” Adidas said in court documents objecting the Rockport-CB sale. “Now, having reaped all the benefits of Adidas’s considerable operating expertise in foreign retail markets, [Rockport proposes] to sell the very business that Adidas maintained for them and to leave Adidas and Reebok holding the bag.”
CB had entered the stalking-horse bid for Rockport’s assets when the brand filed for Chapter 11 in May. In July, Rockport announced that after completing a court-approved marketing process, it intended to complete the asset purchase with CB, pending approval by the Delaware bankruptcy court.
Monday’s settlement could allow Rockport’s $150 million Chapter 11 asset sale to CB to close as soon as this week.
Adidas and Rockport have not yet responded to FN’s request for comment.