Business

Adidas finds buyer for its golf unit

Rory McIlroy plays during the Player's Championship at TPC Sawgrass on May 10, 2017 Image copyright Getty Images
Image caption Rory McIlroy recently signed an equipment deal with TaylorMade

Adidas has sold its struggling golf operations to investment firm KPS Capital Partners.

Adidas will receive $425m (£330m) for the business, which comprises the golf brands TaylorMade, Adams Golf and Ashworth.

The deal comes after years of falling sales for its golf unit.

It also comes just a day after one of golf's superstars, Rory McIlroy, signed an equipment deal with TaylorMade reported to be worth $100m.

Adidas has owned TaylorMade since 1997, and added Ashworth in 2008 and Adams four years later to make it the world's biggest golf supplier.

But it has struggled to generate growth at those brands and last year combined sales fell 1%.

Why are Nike and Adidas abandoning golf?

Adidas does not report the profitability of the golf unit, which sits in a bigger division called Other Businesses. The unit reported a loss of 14m euros last year, with golf making up more than half of its sales.

"We are concentrating clearly on our primary competencies in footwear and sports clothing and on our two main brands Adidas and Reebok," said Adidas chief executive, Kasper Rorsted, in a statement.

The popularity of golf has fallen sharply in the US since the early 2000s, when Tiger Woods was at his peak.

In August last year, Nike announced it would stop selling golf clubs, balls and bags after years of falling sales at its golf division.

KPS Capital Partners will be hoping that it has bought into golf at the bottom of the market.

It is a private equity firm, which has previously specialised in buying manufacturing firms.

Private equity firms buy up firms with the aim of raising their profitability and then selling them at a profit.


Analysis

Image copyright Getty Images

Bill Wilson, BBC online Business of Sport reporter

This move concludes nearly a year of intense behind-the-scenes efforts by German sportswear giant Adidas to offload its golf businesses.

The world's second largest sports apparel and equipment group has seen golf fall out of favour with the middle classes, who have, if anecdotal evidence is to be believed, turned to more fashionable pastimes such as cycling.

Adidas put the golf brands, which have struggled as the sport has declined in popularity in its traditional markets in the US and Western Europe, up for sale last year.

From a sales point of view, other sports such as athletics and basketball offer more attractive opportunities for sales growth.

So no doubt Adidas are relieved to have finally concluded the sale, which had involved them bringing in investment bank Guggenheim Partners in order to find a buyer.


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