Callaway Buys Travis Matthew

The tentative $125.5 million deal was announced on today's earnings call, where, as Claudia Assis reports the company announced a 24% increase in net sales.

The full Travis Matthew purchase release:

CALLAWAY GOLF COMPANY TO ACQUIRE TRAVISMATHEW FOR $125.5 MILLION

CARLSBAD, Calif., August 3, 2017 – Callaway Golf Company (NYSE:ELY) announced today it has entered into a definitive agreement to acquire TravisMathew, LLC, a high-growth golf and lifestyle apparel company, for $125.5 million in an all-cash transaction, subject to a working capital adjustment.

“We are very excited about this acquisition,” commented Chip Brewer, President and Chief Executive Officer of Callaway Golf Company. “With its golf heritage, culture of product excellence and double-digit growth in the golf and lifestyle apparel business, TravisMathew is a great fit with our business, brands, culture and our strategy to grow in areas tangential to golf. This acquisition, once completed, is expected to be slightly accretive to earnings in 2018 and create significant value for our shareholders over the long-term. We look forward to working with the TravisMathew management team to maximize this brand’s growth potential.”

The acquisition is subject to customary closing conditions, including securing regulatory approvals, and is expected to close in the third quarter of 2017. Post-acquisition, TravisMathew will continue to operate out of its Huntington Beach, California headquarters.

The purchase price values TravisMathew at a multiple of approximately 11.8 times projected 2017 full year adjusted EBITDA. Callaway also expects to realize significant value from potential tax benefits associated with the transaction.

In 2017, TravisMathew’s net sales are expected to be in the range of $55-60 million, of which approximately $10-15 million will contribute to Callaway’s 2017 second half financial results assuming the transaction closes in the third quarter of 2017. Including approximately $5 million of estimated transaction expenses and incremental non-cash expense resulting from the acquisition purchase accounting adjustments, TravisMathew is expected to be approximately $0.04 dilutive to Callaway’s 2017 earnings per share but is expected to be slightly accretive in 2018 after taking into account anticipated financing costs and incremental investment in the business to support future growth

Eleven Million Wedges Later, Vokey Enters Canada's HOF

Nice tribute from Rick Young on wedge designer Bob Vokey, who entered Canada's golf hall of fame this week in the "builder" category.

He writes this with a great supporting quote from Acushnet's Wally Uihlein on the key players behind the wedge as we know it.

Eleven million Titleist Vokey designed wedges (and counting) after the very first went into the bag of PGA Tour player Andy Bean in Memphis in 1997, Uihlein believes Vokey’s place in the game’s equipment history is cemented. That point was reinforced by a short history lesson on the wedge category the Acushnet CEO indulged me with.

“This is Bob’s peer group,” he said leaning forward. “He deserves to be mentioned with Edward MacLean, who really had the first-ever patent on a wedge, with Gene Sarazen who took his inspiration for the sand wedge from MacLean, with Ben Hogan and the Sure Out, Sure On, which was the first wedge system with Hogan being the first to say, hey, the club off the fairway needs to be different than the club around the greens. From there, all due credit to Roger Cleveland. He was first to really put his toe in the water and say, I’m a wedge guy, in a full-on commercial sense. Finally you have to give credit to Karsten (Solheim) because he made the high-lofted wedge aesthetically pleasing and functional at the same time. Then there is Voke.

Bloomberg: ClubCorp Sale A Positive Sign For Golf Industry

Bloomberg's Taylor Cromwell considers the ClubCorp sale for $1.1. billion and says it's a positive statement about the core golfer market stabilizing.

He writes:

More broadly, golf has seen a resurgence in so-called avid players, those who play at least 25 rounds on a regulation course per year. The number rose to 8.8 million last year, up 400,000 from 2015, according to the National Golf Foundation. Avid players are critical to the health of the sport because they account for 80 percent of industry spending.

The challenge now is rebuilding with more realistic aspirations.

Several analysts are quoted saying the market correction days have peaked. Thoughts?

ClubCorp Sells After All: For $1.1 Billion To Apollo Global

Reuters' Greg Roumeliotis reports that the publicly-traded company owning 206 clubs and serving over 400,000 members, including at Mission Hills and Firestone, has sold to Apollo Global Management.

It's an all-cash, $1.1 billion deal netting shareholders $17.12 a share, a 31% premium over Friday's closing price. 

DallasNews.com's business writer Paul O'Donnell noted this:

Sunday's announcement comes about three months after ClubCorp's board said it would not seek a sale. Longtime CEO Eric Affeldt announced at the same time that he would be retiring. A month later, the company added two new directors at the behest of activist investor FrontFour Capital Group LLC, which had been critical of ClubCorp's management.

Phil Knight: Nike Lost Money For 20 Years On Golf Equipment

Talking to Bloomberg Television's David Rubinstein, the Nike founder declares that in spite of Tiger Woods, the company could never be profitable on equipment sales.

After mentioning their recruitment of Woods had started three years prior to Tiger turning pro, Phil Knight says the math was simple.

“It’s a fairly simple equation, that we lost money for 20 years on equipment and balls,” Knight told interviewer David Rubenstein, host of “The David Rubenstein Show: Peer-to-Peer Conversations.” “We realized next year wasn’t going to be any different.”

The Bloomberg TV interview airs Wednesday at 9 pm ET.

"Behind the scenes at a $2,000 wedge fitting"

As PXG and others have established high-end club fittings that lead to eye-popping prices for clubs, Golfweek's David Dusek tells us about his experience with JP Harrington's setup at Titleist's facility in Oceanside.

While many of us can't comprehend spending $2000 on a set of wedges, clearly there is a market for these personal service fitting given that Harrington will do 50 to 60 days of fittings with customers. Dusek explains what they'll get for their $2000 besides some very futuristic-looking clubs.

First, the heads are forged from 1025 carbon steel before being milled to precisely the desired shapes. Internal weights made to fit each specific wedge head help raise or lower the center of gravity based on loft, then a large, highly polished tungsten weight is attached in the toe to pull the CG into the center of the hitting area. All that weight can be added because the back plate is made from brushed titanium, which is exceptionally light.

While the grooves are identical to those of Titleist Vokey Design SM6 wedges, the soles of JP Harrington wedges are CNC-milled. Most have aggressive heel and toe relief for increased versatility, but if there is a buzzword Harrington loves to talk about, it’s camber. His wedges tend to have a lot of curvature from the leading edge to the back of the sole, as well as from heel to toe. Harrington believes this helps players maintain speed through the turf for improved consistency.

Poll Result: "How important is it which pros play those clubs?"

Golf Channel Equipment Insider Matt Adams asked his followers on Twitter if tour pro endorsements influence purchasing, and also set up the question with this Morning Drive segment on TaylorMade's recent Rory McIlroy signing.

Granted, his followers are likely core golfers who are prone to have been with the game longer, but it's still fascinating to see how voters believe that professional endorsements translate to buying influence:

When considering the purchase of new clubs, how important is it which pros play those clubs?

— MattAdamsGC (@MattAdamsFoL) May 14, 2017

The segment:

Playoff Shipping Wars: "It certainly caused some consternation"

When GolfChannel.com's Rex Hoggard broke the news earlier this week, I think we just figured the details would suggest merely an optics play. But the FedExCup rule declaring players who endorse competing shipping companies ineligible could have greater ramifications. Oh sure, maybe it just scares a few players away from being endorsed by UPS and on we go with a brown-free Playoffs(C).

But after reading Bob Harig's ESPN.com follow-up chat with agents about the ramifications over some sort a shipping-company endorsement provision, the details will be very important. When and if we get them.

The PGA Tour said it would not comment on that aspect of the contract prior to briefing the players fully on the matter.

"It's certainly less than ideal,'' said agent Mark Steinberg, whose Excel Sports agency represents several players. "It was clearly a part of the negotiation that the tour went through, and it was one of the last stumbling blocks. PGA Tour sponsorship deal may bar players endorsing FedEx rivals from competing in playoffs.

Harig's story includes Chubby Chandler making the Mercedes-BMW analogy, and you can bet many companies will take this precedent and attempt demands in future negotiations.

More interesting will be the ramifications should Amazon want to endorse players while also moving into competing businesses.

Also fascinating will be the perception of the FedExCup as a sports competition should the provision actually rule a competitor ineligible from participating. Could that further damage how the sports world sees the FedExCup?

TaylorMade, Ashworth, Adams Sold For $425 Million To Private Equity Firm KPS Capital Partners

Nice work by Ryan Ballengee at GolfNewsNet with the news shared to Taylor Made employees Wednesday.

The deal ends a year-long effort by Adidas to unload their golf equipment and apparel brands.

David Dusek and Jason Lusk report for Golfweek on the deal, including this:

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.

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.

Ouch Scheduling Luck: National Golf Day Hits Capitol Hill On A Slightly Busy Day In DC

Unfortunate or some might say ironic scheduling, but as the golf world's very own President Donald Trump briefed Senators on North Korea, pushed tax reform and worked to stave off a government shutdown, Capitol Hill was probably not too focused on National Golf Day.

We will never know, but credit the folks in golf for still spreading the gospel in the face of Tuesday's chaos. Over 175 meetings with House and Senate members--who were undoubtedly keeping one eye on their Twitter feeds--took place, reports Ryan Herrington for Golf World.

This year’s efforts focused on three specific areas: health, labor and the environment. Participants attended 175 meetings with members of the House of Representatives and Senate from their home states, passing along the industry’s thoughts on these issues.

In each meeting, We Are Golf participants asked for support of specific bills already proposed in Congress (notably the PHIT Act, which would include physical activity, including golf lessons, green fees and camps/clinics, among tax-deductible medical expenses) or the repeal of current provisions (such as the Clean Water Act, which golf leaders says overregulates ponds and wetlands found on golf courses).

“I look forward to National Golf Day every year,” said Congressman James E. Clyburn, a Democrat from South Carolina. “It’s a chance to visit with the folks at We Are Golf here on Capitol Hill to talk about the positive impact the game has on our economy, worthy charities and personal fitness.”

NGF: "Overall involvement in the game is actually up"

With the addition of Topgolf and other off-course experiences added to their overall counts, the National Golf Foundation's annual study of golf participation reveals a few interesting things.

First, the bad news:

While the latest research indicates a modest 1.2% decline in on-course participation – dipping to 23.8 million (age 6+ who played at least once) in 2016 from 24.1 million in 2015, commitment to the sport in many respects is more evident than ever before.

Now the positives...starting with the committed.

The number of committed golfers – a group that accounts for approximately 95% of all rounds-played and overall spending – rose for the first time in five years, from 19.5 million to 20.1 million.

An 11% increase in "off-course participation" was largely attributable to Topgolf's inclusion in counts...

Driven primarily by the popularity and growth of Topgolf, a non-traditional form of golf entertainment, there were an estimated 20 million off-course participants in 2016. Of those, 8.2 million didn’t play on a golf course.

And the next dreaded but, the conversion factor...

The number of people who say they are “very interested” in taking up golf has doubled over the past five years, growing at an annual rate of nearly 15%. In addition to the 12.8 million non-golfers who said they’re very interested in playing golf, there are another 27.8 million who responded they’re “somewhat interested” in taking up the game. That increase has driven growth in the number of beginning golfers, with those who played on a golf course for the first time jumping to 2.5 million in 2016 from 1.5 million in 2011.

Topgolf is doing its part, with free lessons April 24th as part of National Golf Day. Eric Matuszewski reports in a Forbes roundup of business stories, including the new Seamus golf shoes and other notes.

It's the economy, stupid:

Recent increases in interest (latent demand) and beginning golfers appear to be correlated with increases in consumer confidence, spending and other favorable economic indicators. Just as these measures trended downward along with golf during and following the recession, they are now increasing as interest in traditional green-grass golf builds, and participation in non-traditional golf activity, such as Topgolf, rises.

This is a big number:

Golf’s overall reach remains extensive, and steady. An estimated 95 million people (or one out of every three Americans age 6+) played, watched or read about golf in 2016, the same number as in 2015.

And the big conclusion, which probably has been written, oh, annually...

The game’s challenge remains the same: getting more of those who express interest to actually give golf a try, and converting more beginners into committed participants. The encouraging sign for the industry is that the committed participant group now appears to be stabilized, while the number of players picking up a club at off-course facilities continues to build.

DraftKings Rolls Out Golf Push On Significant Growth Signs

The ramifications could be significant for golf on television and its appeal to a broader audience, therefore the DraftKings push this spring will undoubtedly be watched closely. How successful it all becomes could even influence television negotiations, fan interest and the overall health of professional golf. (You may recall Golf Channel's Rich Lerner asking new PGA Tour Commish Jay Monahan about this in January and receiving a surprisingly open-minded response.)

Dustin Gouker at League Sports Report notes the pre-Masters push DraftKings is making to go all in to grow their audience via enhanced app and site, uh, games. 

According to DraftKings, fantasy golf on its platform has “experienced a 23x growth and more than 15 million entries” since launch.

Gouker explained the difference in DraftKings and rival/future partner Fan Duel's approach to fantasy golf here.

The ad campaign is clever. Though how much of this is real, I don't know. But it's entertaining and of course, will lure many of us to make a donation to their cause!

Costco Case Analysis: "A bold ask in the world of golf ball patents, especially where Acushnet is concerned."

Mike Stachura and Mike Johnson try to consider what Costco aims to achieve in filing a lawsuit against Acushnet over patents, especially since they note the effort is to invalidate the works of a company known to vigorously defend their patents.

Reading the reporting by Stachura and Johnson, it's hard not to wonder if the case was started in part as a publicity plot, especially with a new version of the ball likely coming soon. However, the risks and costs in such a legal battle would suggest such a move merely to sell some golf balls could backfire for Costco.

Acushnet was asked for comment in an analysts call an declined.

"You know based on past experience that we never comment on the competition, and as you would expect, we don't comment on any outstanding litigation," he answered to one analyst's specific question about the impact of the Kirkland Signature ball. "We do respect the fact that you're going to ask questions of a competitive nature and of a litigious nature and hopefully catch us at a weak moment, but we'll take a pass on both of those."

This analysis from a legal expert suggests Costco made a bold and shrewd move in the approach to its filing.

“It’s a problem for the alleged infringer if the patent holder doesn’t sue them, so this does two things,” said Rochelle C. Dreyfuss, the Pauline Newman Professor of Law at New York University School of Law. “It accelerates the lawsuit, which sometimes the alleged infringer wants, and it also gives the alleged infringer a choice of court.”

Johnson and Stachura draw this conclusion that I'd agree with, except for the buzz and store traffic likely increased by the Costco ball craze.

For all the media hype and the cult-like status afforded the Kirkland Signature ball, fact is its contribution to Costco’s bottom line is likely no more than an accounting rounding error due to its inability to produce more than limited quantities of the ball.