Adidas sells TaylorMade Golf for $425 million to KPS Capital Partners

TaylorMade

Adidas sells TaylorMade Golf for $425 million to KPS Capital Partners

Equipment

Adidas sells TaylorMade Golf for $425 million to KPS Capital Partners

PONTE VEDRA BEACH, Fla. – Adidas has agreed to sell TaylorMade Golf to a newly formed affiliate of KPS Capital Partners, LP for $425 million, the sports apparel giant said in a news release.

The New York-based KPS Capital Partners manages $5.3 billion in global assets in manufacturing and industrial companies, including automotive parts and electrical components.

“TaylorMade is one of the preeminent golf equipment brands worldwide, with leading-edge products that consistently provide consumers a distinct performance advantage over the competition,” said David Shapiro, a managing partner of KPS, in a statement. “We look forward to working with chief executive officer David Abeles, his management team and all TaylorMade employees around the world to build on this great platform by driving growth both organically and through strategic acquisitions.

“The combination of this iconic brand and KPS’ track record of working constructively with talented management teams to make businesses better will provide the ideal foundation for TaylorMade’s future growth.”

About half of the $425 million will be paid in cash, while the remaining portion will be paid in the form of a secured note and contingent considerations. The final sale is expected to be completed in late 2017.

“TaylorMade is a leading global golf brand with an exceptionally strong market position,” said Kasper Rorsted, CEO of Adidas AG in a release. “We would like to thank all TaylorMade employees for their many contributions to our company and wish them all the best for a successful future under their new ownership.”

The German-based Adidas announced last May its intentions to sell its TaylorMade, Adams and Ashworth brands to focus on higher-growth opportunities, especially in apparel and shoes. TaylorMade was founded in 1979 by golf equipment salesman Gary Adams with a focus on metalwoods, and the brand was purchased by Adidas in 1998.

“Within our long-term strategy ‘Creating the New’, our focus is clearly on our core competencies in footwear and apparel and on our two major brands Adidas and Reebok,” Rorsted said.

TaylorMade had faced strong headwinds in recent years, with losses in market share in key categories and complaints from retailers – particularly from Dick’s Sporting Goods – that the company’s rapid product cycles were unsustainable. In last year’s annual report, Adidas said its golf division was a drag on revenue growth and margins. The company went through several layoffs in 2015 amounting to roughly 20 percent of staff, and then-CEO Ben Sharpe was replaced by Abeles in March 2015 – Sharpe had been on the job for 13 months. Abeles will continue as TaylorMade’s CEO.

“This is the beginning of an exciting new era for TaylorMade, and our entire management team is excited to partner with KPS in this next phase of our growth and continued development of our brands, business and people,” Abeles said in a statement. “The TaylorMade team is deeply committed to making the most technically advanced performance-driven golf equipment, and this mission will never change. Given their strategic vision, operational resources and significant access to capital, KPS is the ideal partner to help TaylorMade build upon its strong momentum.”

The introduction of the popular “M” family of woods and irons, plus Abeles’ announced slowdown in product cycles that wouldn’t overwhelm consumers and retailers, helped the company regain market share in the past year. TaylorMade says its M1 and M2 drivers won the most events on the PGA Tour in 2016.

Adidas reported that TaylorMade’s first-quarter 2017 net sales were $294 million, up 4 percent on a currency-neutral basis year over year and with a greater product margin, but that Adams and Ashworth were drags on the golf unit. The golf unit’s net sales for 2016 were $892 million, down 1 percent from $902 million in 2015.

Despite uncertainty over an impending sale, TaylorMade has been busy signing premier golfers to endorsement contracts. Since intentions to sell were announced last May, the company re-signed Jason Day and Dustin Johnson to contract extensions, and on Tuesday announced the addition of Rory McIlroy. Sergio Garcia, a longtime TaylorMade endorser, won the Masters last month. Those are four of the top six players in the Official World Golf Ranking.

World No. 1 Dustin Johnson, who has been an Adidas endorser since 2007 and who signed contract extensions in September to continue wearing Adidas clothing and shoes and to continue playing TaylorMade clubs, wasn’t worried about TaylorMade’s future.

“Obviously I’ve known that it has been for sale and I know there have been some interested parties in buying it, but I found out, probably, about the same time you guys did,” Johnson said from TPC Sawgrass, site of this week’s Players Championship. “Today, this morning on the range, I knew they were going to announce it. But you know, TaylorMade is a great company. I don’t know why Adidas sold it, but it doesn’t really affect me at all and it doesn’t affect the brand at all. Someone else just owns it.”

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