TaylorMade-Adidas Golf wrapped up its acquisition of Ashworth at the agreed price of $1.90 price per share in cash, after about 74 percent of the company’s outstanding shares were tendered for the offer at the time of its expiration on Nov. 18.
Adidas exercised its top-up option under the merger agreement between the two companies to lift its shareholding to 90 percent of Ashworth, and then made use of Delaware law to complete the acquisition through a short-form merger. Under this deal, Ashworth will become a wholly owned subsidiary of TaylorMade-Adidas Golf (TMAG), and any Ashworth shares not tendered will be canceled, to be converted into a right to receive $1.90 per share, without interest and less taxes.
In other words, Adidas is paying about $28 million for Ashworth, which was a leading golf apparel brand before it lost its way in the last decade. However, Adidas declared last month, before it launched the offer, that it would also assume $46.3 million in debt. For the fiscal year ended Oct. 31, 2007, Ashworth suffered a net loss of $14.1 million on consolidated net sales of $202.2 million, down by 3.5 percent.
Ashworth was repeatedly placed on the auction block in the last years, as it struggled with management issues and dwindling sales. Its financial troubles became plainly apparent when it issued its third-quarter results and warned that it may face difficulties in fulfilling its financial obligations.
The two companies said it was still too early to map out their integration and the advantages to be drawn from the acquisition. Some analysts were critical of the move, questioning why Adidas needed to buy another golf apparel brand at a time when it was going strong, particularly in the American market. It previously dropped ownership of the Greg Norman brand of apparel, which it had bought as part of Reebok International’s takeover, apparently because the business was rather small. But Adidas stated earlier that it was interested in Ashworth because of its strong position in traditional cotton-based products, which would be complementary to its own more technical golf apparel range.
The issue of the Callaway apparel range, which Ashworth has been selling under license for several years, appears to have been amicably solved. Before TMAG came into the picture, Callaway and Ashworth had been locked in a legal dispute over the Callaway apparel range, after Ashworth acquired the SunIce brand from Canada in January. Callaway reportedly argued that this acquisition amounted to a conflict of interests, since SunIce and Callaway apparel were selling competing golf outerwear products.
Now that TMAG has acquired Ashworth it seems inevitable that the Callaway apparel license will be terminated anyway, given the rivalry between TaylorMade and Callaway in the equipment business. George Fellows, Callaway Golf’s chairman, acknowledged as much last month when he said that his company was looking at other potential licensing partners. This will strongly reduce the turnover of Ashworth, leaving analysts to argue that TMAG has paid a generous price for the Ashworth brand. It could not be determined exactly how the issue was solved, perhaps through some kind of financial compensation.