Reebok Sells Ralph Lauren Footwear to Polo Ralph Lauren

Reebok International Ltd. (RBK)on Monday said it would sell Ralph Lauren Footwear Co. Inc. to Polo Ralph Lauren Corp. (RL) for $110 million, as Polo aims to grow its luxury accessories business and Reebok moves to focus on its main athletic shoe business.

Reebok, which had formed its Ralph Lauren Footwear (search) subsidiary after entering into a license agreement with Polo Ralph Lauren in 1996, said it expects an undisclosed gain from the sale, which should close by the end of the second quarter.

Polo said the deal should be marginally dilutive to its fiscal 2006 earnings.

"We see this as a positive for (Polo Ralph Lauren), though in the short term the transaction will be modestly dilutive," Prudential Equity said in a research note.

Prudential, which has "neutral weight" ratings on both Reebok and Polo, said Polo is seeking to bring licenses back in house and that handbags could be "the next likely acquisition" after this move.

Polo was not immediately available to comment.

Reebok said it would discuss the financial impact of the deal during its conference call on second-quarter earnings set for July 21.

Shares of Reebok were up 29 cents, or 0.7 1 percent, at $41.55 on the New York Stock Exchange (search), while shares of Polo were up 16 cents, or 0.4 percent, at $37.68.

New York-based Polo said UBS Investment Bank was its financial adviser on the transaction. Reebok was advised by Credit Suisse First Boston LLC.