2003: Business - Wilson reorganizes

With Wilson Sporting Goods merging its golf and tennis divisions and longtime president Jim Baugh leaving unexpectedly, the fate of the company’s golf business has become clouded.

The reorganization announced April 29 comes as Wilson Golf continues its spiral – marked by disappointing ball launches and lackluster marketing – that led to a 20-percent drop in net sales for the first quarter.

Moreover, the decline of once-venerable golf companies such as Wilson and Spalding, which is on the selling block, is further evidence that the game’s most visible brands today – Titleist and FootJoy, Callaway, TaylorMade-Adidas and Nike – are practically pushing their predecessors off stage.

Even Roger Talermo, chief executive officer of the Amer Group, Wilson’s Finnish parent company, acknowledges the golf division is at a critical crossroads. He insists it must, and will, seek acquisition or merger options – or face extinction. But some analysts and industry observers say Talermo is actually positioning Wilson Golf for a sale.

“The industry today is quite volatile and in the midst of some fairly radical change,” Talermo says. “There is a lot of consolidation and restructuring. And if those trends continue, we must do something within, say, the next 24 months. Otherwise, I do not think we can survive long term the way we are.”

The golf division needs to increase its overall size and power to survive, let alone flourish, under current market conditions, he says. The company posted 2002 net sales of $224 million, which puts it in a sort of weird netherworld between industry giants and marginal niche players.

“Wilson Golf has been what I would call a second-tier company,” says one veteran industry executive. “And if you are not at the level that constitutes the first tier, which I would put at $500 million of annual sales and above, then you had better be very focused and very profitable or you will shrink down to nothing.”

Talermo has not disclosed specific actions the company might take nor has he identified any candidates for acquisition or partnership. But he asserts Amer has no interest in exiting the golf category.

“We have tried to grow things in an organic way, by bringing out good products and supporting them . . . but as the industry continued to get tougher and tougher, it became clear we could not count on that solution,” Talermo says. “So, we have had to consider other options.”

But looking to get big – and actually doing it – are two very different things.

Some analysts and industry observers say Wilson isn’t in a position to execute a significant merger or acquisition.

“I am just not sure how much interest there really is out there for someone to hook up with Wilson Golf,” says another industry executive.

“They had a nice thing going for a while, but their ball business has been getting hammered and is down more than 30 percent for the first quarter. And they have lost a lot of momentum with clubs, which have also fallen off.”

Casey Alexander, special situations analysts for Gilford Securities in New York, also questions Wilson’s ability to become more competitive.

“I don’t know that Wilson can buy something big enough to allow it to be a viable premium brand,” he says. “I believe it can only be slid into a company that already has that and become part of a larger portfolio.”

Adds Alexander: “Frankly, I feel this talk of a possible acquisition is a way to get people talking to (Talermo) about Wilson. I think it is a soft ‘For Sale’ sign, an indication that Wilson can be bought. And a discussion for some sort of joint venture could actually turn into an offer for Wilson Golf.”




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