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Adidas to offer $70M for Adams Golf

by Andrew Bulkeley | Published March 19, 2012 at 12:39 PM

German sportswear giant Adidas AG on Monday, March 19, agreed to buy Adams Golf Inc. after a major shareholder forced the golf club designer and manufacturer to initiate a strategic review. Adidas of Herzogenaurach, Germany, said it would pay $10.80 per share for Adams Golf, a 3.4% premium to the stock's Friday close. The offer is 71% more than the stock's closing price just before Adams disclosed its review on Jan. 4 and values the company at $70 million in total.

Partners at SJ Strategic Investments LLC, which owns 35% of the company, in November lashed out at Adams Golf for its executive compensation structure and seeming disinterest in offering shareholder value.

The company responded by hiring Morgan Stanley in January to review strategic opportunities.

Monday's agreement has the blessing of Adams Golf's board as well as the critical shareholders. The German company said it could pay for the acquisition using existing cash and credit lines.

Adidas has used dealmaking to build its golf business. It first swung into the sport with the €1.4 billion ($1.8 billion) acquisition of Salomon Worldwide in 1997 but was never able to get the company's winter sports business off the ground. It retained Salomon's Taylor Made Golf Co. business and sold Salomon's remaining activities to Finland's Amer Sports Corp. for €485 million in 2005.

Then, in 2008, Adidas pitched into golf retailer Ashworth Inc. for €54 million.

The German company will now get a Plano, Texas-based maker of golf clubs that had $96.5 million in revenue in 2011 and net profit of $14.5 million, both up on 2010.

And the deal will bring PGA Tour golfer and former U.S. Ryder Cup team member Kenny Perry back to Adidas -- he abandoned a 20-year relationship with Taylor Made in December in favor of a multiyear contract with Adams.

The sale is also the second golf-related deal in a year for Morgan Stanley. Last summer it advised Fortune Brands Inc. on the $1.23 billion sale of its Acushnet Co. golf business, including Titleist balls and FootJoy shoes, to a consortium that involved Mirae Asset Private Equity and sportswear company Fila Korea Ltd.

Adidas shares gained €0.05 in afternoon Frankfurt trading to €59.15, while Adams Golf leapt 85 cents, or 8.6%, to $10.71 on Nasdaq Monday morning.

Barclays Capital provided financial advice to Adidas, while Sheppard Mullin Richter & Hampton LLP provided counsel. Haynes and Boone LLP acted as counsel for Adams Golf.

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