Dive Brief:

• Adidas has agreed to sell its TaylorMade, Adams Golf and Ashworth golf brands in a deal valued at $425 million to a newly formed affiliate of private equity firm KPS Capital Partners, LP, according to a company press release.

• Under the terms of the deal, about half will be paid in cash with the remainder paid with a combination of secured note and contingent considerations, adidas said. The deal is expected to close later this year. 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. 

• Some adidas Golf employees will be integrated into the company’s Heartbeat Sports business unit, Kasper Rorsted, CEO of adidas AG, said in a statement: “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.”

Dive Insight:

The market for golf gear sadly has faded like the career of Tiger Woods, the one-time superstar of the sport who was arguably more directly responsible for the rise of market years ago than any other player or market factor. That fade, not to be confused with Rory McIlroy's much more awesome driver fade, has drastically affected major golf brands. Last year, Golfsmith sold itself to Dick's Sporting Goods through bankruptcy and Nike threw in the towel on its golf equipment business.

This sale by adidas is similar in some ways to Nike's exit. TaylorMade and Adams Golf are both primarily known as equipment producers, so this could be read as adidas' exit from the same business segment. However, Ashworth is primarily known for golf apparel. When Nike ended production of its own golf gear, it appeared to double down on its marketing of golf-related apparel by announcing new endorsement deals with golf stars Jason Day and Rory McIlroy.

With this announcement, adidas emphasized its ongoing strategic focus on apparel and footwear, though it is not clear to what extent this focus may continue to include golf apparel and footwear. It seems unlikely that adidas would leave the golf market entirely, but without these brands, adidas will have its work cut out for it as far as remaining relevant to golf enthusiasts.

The deal itself suggests that no other sports brands were interested in picking up adidas' golf properties. And while the value of the deal sounds impressive enough, the structure of the deal makes it seem less so, with adidas pocketing only half the deal value in cash, But, perhaps that shows how eager adidas was to be rid of these brands, and to devote the resources previously spent on them to other properties driving adidas' recent impressive growth.