Adidas’ lengthy effort to sell its TaylorMade golf-equipment brand has landed deep in the rough.
Last month, Adidas made a splash signing Tiger Woods to an endorsement deal in an attempt at reinvigorating TaylorMade after putting the brand on the block last spring.
“I was at the PGA show [Jan. 24 to 26] and Tiger was the talk of the show,” a source close to the sale said.
Then Woods missed the cut in his return to PGA Tour play at the Farmers Insurance Open and dropped out of the Genesis Open and Honda Classic due to lingering back issues, leaving his comeback hopes in doubt.
“That momentum they so desperately needed didn’t come,” the source said, adding that it makes a hard sales process even more difficult.
Losses at TaylorMade are much greater than many potential bidders anticipated, causing suitors to walk away, sources said.
The golf division that Adidas announced was for sale last May — which includes golf club maker TaylorMade, and the much smaller Adams and Ashworth brands — is losing between $75 million and $100 million a year, according to sources close to recent deal talks.
That is quite a fall from 2013 when TaylorMade was posting $1.7 billion in sales and a healthy profit, sources said. Today, sales are a little better than $500 million.
Adidas last year was asking for more than $500 million for the business, but now may have to give it away, a source who considered making a bid said.
Additionally there is a new problem on the horizon.
TaylorMade’s reputation is largely based on its market-leading drivers.
Rival Callaway last month introduced a completely new driver, the Epic, which takes direct aim at TaylorMade.
“It’s Callaway’s most intriguing driver in two decades,” GolfDigest said in its review.
TaylorMade also introduced new 2017 M1 and M2 drivers, but these are improvements of existing models and are not seen as great innovations.
The Epic is a big threat to TaylorMade, the source close to the sale process said.
A suitor may now wait a few months to see if Callaway becomes the main driver in the industry, the source said.
Adidas needs to find a buyer for the golf equipment brands in the next three months or it will likely have to either shut them down or keep them in house and work at reducing losses, sources said.
Last May outgoing Adidas CEO Herbert Hainer said, “TaylorMade is a very viable business,” but conditions have changed. The declining golf equipment industry has been taking some big whacks.
In March Sports Authority, a major TaylorMade customer, went bankrupt; Nike in August announced it was exiting golf clubs, balls and bags, eliminating it as a buyer of assets including TaylorMade; then in September retailer Golfsmith filed for bankruptcy.
Meanwhile, several potential TaylorMade suitors have had their own issues, making it hard to acquire a money-losing brand.
Acushnet, owner of Titleist, has seen its shares fall 1.3 percent since its October IPO and Callaway is in the midst of its own turnaround.
Neither Adidas nor its banker Guggenheim Securities returned calls.
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