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TaylorMade-adidas Golf (TMaG) dabbled with the apparel business when it briefly owned the Greg Norman Collection before selling it in 2006. But the experience, it would appear left a lasting impression, as the company decided to acquire all of the outstanding shares of Ashworth, Inc. As financial markets have teetered on the brink of disaster and the focus on Wall Street is about cash,
TMaG is going against present convention wisdom by
spending versus preserving working capital. Wall Street is
apprehensive how an economic recession may
influence future sales regardless of the industry or sector.
The transaction value is $72.8 million (€54.1 million),
which includes the assumption of $46.3 million (€34.4
million) of Ashworth debt based on Ashworth, Inc.'s 10-Q for the period ended July 31, 2008. Shareholders of Ashworth (ASHW: NASDAQ) are getting $1.90 per share in cash.
“Ashworth is a well-established, authentic golf apparel brand with a strong heritage and represents an excellent addition to TaylorMade and adidas Golf,” said adidas AG Chairman and CEO Herbert Hainer, parent company to TMaG. “This acquisition underscores our commitment to continued growth in the golf category.”
Ashworth became a favorite with golfers in the 90’s as it provided an alternative look featured with a soft collar. Fred Couples remains the player most associated with the brand, but it was he and John Cook who were two of the first brand ambassadors to wear the clothing. The apparel business inside golf is extremely competitive with an overabundant number of vendors vying for shelf space both in green grass and off course locations. In recent years Nike Golf, in part due to the popularity of Tiger Woods, has become the “cool” brand that many recreational fans choose to wear. Ashworth’s business has suffered in recent years for a variety of reasons. For the third quarter ended July 31, 2008, Ashworth’s sales were $45.2 million, which produced a net loss of $9.6 million. With a quarter remaining in it’s fiscal year, sales stood at $137.5 million, down from the previous year when it has $147.6 million in revenues. Ashworth has lost $16 million from its operations, in the current fiscal year, which is higher than a year ago when its bottom line reported a lost of $10.6 million.
“We are excited to bring Ashworth alongside our industry-leading TaylorMade and adidas Golf brands. TaylorMade-adidas Golf’s mission is to be the best performance golf company in the world and adding Ashworth is another important step in achieving that goal,” commented Mark King, President and CEO of TaylorMade-adidas Golf.
The Board of Directors of Ashworth has approved the transaction. In addition, members of the Knightspoint Partners group who collectively own over 16% of Ashworth’s outstanding shares have entered into an agreement whereby they have agreed to tender their shares. The Knightspoint Partners group represents the largest reporting shareholder group of Ashworth.
The adidas Group plans to finance the acquisition with cash on hand or through existing credit lines. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter 2008.
"This deal provides exciting prospects for our colleagues, partners and customers around the world. The Ashworth brand fits perfectly into TaylorMade-adidas Golf’s line-up of brands and together we will be able to increase efficiency and drive the golf apparel business going forward, leveraging a broad set of resources,” said Allan Fletcher, CEO of Ashworth, Inc.

SIDENOTE:
An interesting off shoot of this development pertains to Callaway Golf (ELY: NYSE). Ashworth is the company’s vendor for Callaway branded apparel. Since there has been a long standing rivalry between the two equipment companies, it remains to be seen whether they will attempt to work together going forward. Mark King was once a Callaway Golf employee who walked out on his employment contact to take over TMaG. He was subsequently sued by his former employer for breach of contract.