adidas confirms plans to sell TaylorMade

The company will actively seek a buyer for the remainder of its golf business, which mainly consists of the TaylorMade brand...

By: Tony Covey

As you may recall from the last time we discussed the potential sale of TaylorMade, adidas Group had entertained a round (I'm told two, actually) of offers for the company before announcing that a final decision would be made after Q1 and following a strategic review.

Q1 is complete, as is that review, and in no uncertain terms adidas Group CEO, Herbert Hainer, has made it clear that TaylorMade, along with Ashworth and Adams Golf, is for sale.

“TaylorMade is a very viable business. However, we decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market. With its leadership position in the industry and the turnaround plan gaining traction, which is clearly reflected in the top- and bottom-line improvements recorded in Q1 as well as recent market share gains, I am convinced that TaylorMade offers attractive growth opportunities in the future. At the same time, the planned divestiture will allow us to reduce complexity and focus our efforts on those areas of our business that offer the highest return and where we can have the biggest impact in reaching our consumers and winning their loyalty for the adidas and Reebok brands.” - Herbert Hainer, CEO , adidas-Group

The short version of the adidas plan is for the company to sell its three golf brands, while increasing its focus on apparel and footwear. While that's likely true across the whole of the company, the takeaway is that adidas Golf - and the golf shoes and apparel it produces - will remain under the adidas umbrella.The TaylorMade portion of TaylorMade-adidas Golf will be sold. The adidas part won't.

What Buyers Would Be Getting

Despite a rocky couple of years, TaylorMade remains the #1 Driver brand in golf (both on tour and at retail), it's market shares within its key categories (metalwoods and irons) are trending in the right direction, and while the company was down 1.4% (Year over Year) for Q1 on a currency neutral basis, most, if not all, of that can be attributed to declines at Ashworth and Adams where there are basically no products to sell.

Profit margins were also lower.

Mr. Hainer is almost certainly right, however. There's plenty of upside for the TaylorMade brand, provided the company can be had for the right price. We've heard 500MM as the broad ballpark number that adidas had originally hoped to get for the company. Our insiders suggest that without the higher margins brought by adidas footwear and apparel, the actual value of the hard goods division is likely substantially less.

Potential Buyers

We reported earlier that Bridgestone was a potential buyer. We're told the company had dropped out after the first round of bidding, and we're not sure they'll jump back in now that things are a bit more official.

Despite persistent rumors, and I suppose wishful thinking, we don't believe Under Armour is potential buyer as it's unlikely adidas would sell to a major competitor.

The most likely buyer will emerge from the private equity world. That was the case with 5 of the original 6 bidders we heard about.

What It Means for the Industry

Without knowing who the buyer will be, it's impossible to know what impact it will have on how TaylorMade does business. The backing of adidas is what gave TaylorMade the marketing spend that helped propel it to the top of the industry. The new owners would likely concentrate on steady growth and profitability, which would likely mean a more restrained TaylorMade with strategies that more closely mirror some of it's more revenue-focused competitors.

Time, as it always does, will tell, but the will they or won't they (sell TaylorMade) part is over. Now it's simply a matter of when and to whom.

Stay Tuned.

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