Adidas is to buy Reebok, its American rival, for €3.1 billion (£2.14bn) as the sportswear giant gears up to take on the worldwide market leader Nike.

Adidas, which is based in Germany, said it had been attracted by Reebok’s strength in the United States and dubbed the deal a "major strategic milestone" in its campaign to sell trainers and tracksuits to American sports enthusiasts and urban fashionistas.

Reebok started life in Bolton in the 1890s but has since played to its status as an iconic brand among America’s MTV generation. The company recently launched a marketing campaign where American rappers, such as Jay Z, rather than sports stars endorsed its footwear.

Adidas's focus on football means it has traditionally been stronger in Europe. The company sponsors the England captain David Beckham and earlier this year signed a record £27 million deal with Fifa, the sport's governing body.

With combined sales last year of around £6.2 billion, the new group will close in on Nike's £7.7 billion in revenues.

Adidas and Reebok, which has been listed on the New York Stock Exchange for 20 years, said they had both agreed on the tie-up, which will give Adidas around a fifth of the US market.

The deal is subject to regulatory approval in the US and Europe as well as by shareholders and is expected to be completed during the first half of 2006.

Herbert Hainer, the Adidas chief executive, said the move represented "a once-in-a-lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry".

"Together, we will expand our geographic reach, particularly in North America, and create a footwear, apparel and hardware offering that addresses a broader spectrum of consumers and demographics."

However, shares in Adidas fell sharply in Germany this morning on concerns the company could have overpaid.

Adidas will buy all the remaining shares in Reebok International Ltd for $59 a share - a 34.2 per cent premium to yesterday’s closing price.

Shares in Adidas was €4.06 or 2.75 per cent lower at €143.46 in morning trade while the German DAX 30 index was 8.36 points lower at 4,924.51.

Some City analysts termed the price Adidas will pay for Reebok "ambitious".

In Germany, news of the takeover overshadowed Adidas's second quarter results, which beat expectations. The company posted operating profits of €153 million, up from €123 million a year earlier, as sales improved in all regions except Europe.

Second-quarter sales reached €1.5 billion, up from €1.4 billion in the same quarter last year.

Reebok began when Joseph William Foster started making running shoes. In 1958, two of Mr Foster’s grandsons started a company that came to be known as Reebok.

The firm’s shoes were spotted by Paul Fireman at an international trade show in 1979. Mr Fireman negotiated the North American distribution licence and introduced its running shoes in the United States that year.

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