The Loop

Callaway sells Top-Flite to Dick's

April 04, 2012

At one time Top-Flite enjoyed one of the largest market shares in the golf ball category. Today, the brand was sold by Callaway Golf to Dick's Sporting Goods for $20 million in cash,  according to an 8-K filing. Included in the 8-K filing is this statement: "The net effect of the sale of these brands, including the gain recognized, is not expected to have a material effect on the Company's net income for 2012." In 2003 Callaway purchased Top-Flite Golf (which, at the time, was comprised of the Top-Flite, Strata and Ben Hogan brands) for $125 million through a pre-packaged bankruptcy agreement. Callaway sold off the Hogan brand to Perry Ellis earlier this year.  Although some may look at the numbers and see a dramatic loss on the deal, fact is Callaway had a revenue stream for nine years with Top-Flite. It also still owns the Chicopee, Mass., ball factory (which greatly reduced production costs) as well as all the valuable intellectual property.  In fact, at the time of that deal, then Callaway CEO Ron Drapeau said, "It's a good marriage on paper." The purchase gave Callaway an impressive--and much sought-after--portfolio of intellectual property and golf-ball patents, while the combined market share of Top-Flite and Callaway balls made it the No. 2 ball company. Further, Jim Furyk had just won the 2003 U.S. Open with a Top-Flite Strata ball and in 1998 Mark O'Meara had won a pair of majors, including the Masters, using a Top-Flite Strata Tour 90. At the start of 2005, Top-Flite still held a healthy 12 percent market share at on- and off-course golf shops. That year, however, began the start of a steady decline in sales and by year's end the company's share in balls had eroded by some 25 percent.  Today, the company's market share is only about one-third of what it was in 2005 with all of its current models selling for $20 a dozen or less. "The decision to sell Top-Flite reflects the Company's renewed focus and commitment to driving the proficiency of our core businesses, specifically the success of Callaway and Odyssey products," said Chip Brewer, Callaway's recently hired CEO. "Our strong working relationship with Dick's Sporting Goods went a long way towards the completion of this agreement and we look forward to their stewardship of the Top-Flite brand." The divestitures of Hogan and Top-Flite follow a global restructuring at Callaway that was designed to streamline the organization and reduce costs. On the acquisition side, the addition of Top-Flite is additional validation of Dick's commitment to golf and gives them another recognizable brand name to go with its Walter Hagen brand as well as more recent acquisitions of Maxfli and Nickent.  -E. Michael Johnson Follow me on Twitter @EMichaelGW