Herzogenaurach, Germany: adidas has confirmed it has entered into a definitive agreement to sell its TaylorMade, Adams Golf and Ashworth golf brands to a newly formed affiliate of KPS Capital Partners, LP for a total consideration of US$425 million.

 

Around half will be paid in cash with the remainder in a combination of secured note and contingent considerations.

 

The transaction, which is subject to customary closing conditions, is expected to be completed later in 2017. As a result of the transaction, adidas will record a non-operational negative P&L impact in the high-double-digit to low-triple-digit million euro range, which will be reported in discontinued operations as part of the company’s 2017 results.

 

Kasper Rorsted, CEO of adidas AG, said: “TaylorMade is a leading global golf brand with an exceptionally strong market position. We would like to thank all TaylorMade employees for their many contributions to our company and wish them all the best for a successful future under their new ownership. At the same time, we welcome all adidas Golf employees who will be integrated into our adidas Heartbeat Sports Business Unit.

 

“Within our long-term strategy ‘Creating the New’, our focus is clearly on our core competencies in footwear and apparel and on our two major brands adidas and Reebok.”

 

As detailed in the adidas 2016 Annual Report, the divestiture of the golf hardware business changes some specifics of the company’s outlook for the current year with adidas expecting to increase its net income from continuing operations to a level of between €1.200 billion and €1.225 billion in 2017.

 

In addition, the strategic divestiture of the three golf brands has also already been reflected in the company’s updated long-term outlook. As announced in March 2017, adidas aims to achieve net sales of €25 billion to €27 billion and an implied operating margin of 11% by 2020.

 

Guggenheim Securities LLC acted as exclusive financial advisor to adidas AG and Sheppard, Mullin, Richter & Hampton LLP served as legal counsel.

 

David Shapiro, a Managing Partner of KPS was quoted as saying: “TaylorMade is one of the pre-eminent golf equipment brands worldwide, with leading-edge products that consistently provide consumers a distinct performance advantage over the competition. The combination of this iconic brand and KPS’ track record of working constructively with talented management teams to make businesses better will provide the ideal foundation for TaylorMade’s future growth.”

 

In a letter to staff, TaylorMade CEO David Abeles wrote: “Over the course of the past 12 months, I have personally come to know the leadership team at KPS and, like TaylorMade, they have talented people with strong professional values who share our vision. I couldn’t be more thrilled that they have chosen to acquire our company.

 

“Today’s announcement that TaylorMade will be joining KPS marks the next step in our journey together, a stepping stone toward realising our mission and vision, and for all of us, an exciting new chapter.

 

“This is a great moment to reflect on TaylorMade’s journey as part of the adidas Group. Being a part of adidas, since 1998, has been an incredible ride. Over the past 19 years TaylorMade has grown to become the innovation and performance leader in the golf industry, and has strengthened its market share position in all categories during this period.

 

“Our remarkable growth was made more possible because of adidas’ belief and support. I would like to thank Kasper and the wider team in Germany for everything they have done to help us be successful. We look forward to working closely with KPS and the adidas Group over the next several months to ensure a smooth transition for TaylorMade. We are targeting Fall 2017 for an official close date and change of ownership.

 

“As one chapter closes, another one begins. So this is also the beginning of a new and exciting phase in our company’s history.”

 

Earlier this week, TaylorMade announced a long-term endorsement deal with world number two Rory McIlroy. The Northern Irishman joins the formidable TaylorMade stable which also includes world number one Dustin Johnson, Masters champion Sergio Garcia and fellow Major champions Jason Day, Justin Rose and Tiger Woods.