Who Gets Spalding -- and Do You Care


Just after Labor Day, a court will hold an auction to determine who will own what remains of one of the oldest names in sporting goods.
And golf consumers everywhere will turn right to the Red Sox box score.
Whatever wincing is done September 4 will likely be more related to the inevitable dog-day slide of the anti-Yankees than to the other New England disintegration, the dividing up of the remains of Spalding Golf.
Actually, Spalding is technically already gone. The non-golf assets of the century-old sporting goods company were sold off earlier this year, leaving the substantial golf component, which was then called Top-Flite Golf after its most prominent brand. When Top-Flite went on the block, TaylorMade-adidas Golf kicked the tires. But finally, Callaway Golf emerged as the preliminary winning bidder in a special bankruptcy proceeding that allows Top-Flite to declare bankruptcy and then show up in court with a ready buyer who will take the company out of insolvency. The proposed price: $125 million. But the law says the court must give other bidders a chance, just in case someone else can top the offer.
Whats actually for sale? Most prominently, there are the proven Top-Flite and Strata golf ball brands (Top-Flite has been used on clubs at various times over the years as well), plus the venerable Ben Hogan club brand. There are two golf ball plants, one in Chicopee, Mass., north of Hartford, Conn., and another in Gloversville, N.Y. Their combined capacity is about 30 million dozen per year, although they are said by industry sources to be producing only about 19 million dozen annually in this depressed golf economy. And there is the Hogan club facility in Fort Worth, Texas.
The main reason the Red Sox will cause more heartburn than this sale is not the Babes Curse, but the fact that nothing about this bankruptcy deal is likely to change the lives of golf consumers, even avid ones. The brands involved are not likely to vanish any time soon no matter who buys them. Their equity is simply too strong, even in their owners insolvency, for the industry to ignore. Pull the rug out from under Strata, Hogan and the related brands, and everyone who admires Jim Furyk enough to buy the gear he used to win the U.S. Open will go to another company. That would be the kind of business misstep a new owner cant afford.
Still, the business chess is interesting. Only two approved bidders are expected at next weeks auction: Callaway and TaylorMade, through its corporate parent, adidas. Each bidder has a unique interest and could take over under a collection of scenarios ' and those dont always involve actually owning or operating these brands.
Callaway, whose ball business hasnt taken off the way it had hoped, would love an excuse to close its expensive, state-of-the-art golf ball plant in Carlsbad, Calif. Almost everything you do industrially in California is expensive, and that plant has a capacity of only about six million dozen. Selling the small plant and gaining 30 million dozen in capacity, either for itself or subcontract manufacturing, could be seen by the Wall Street analysts who watch Callaway as a shrewd move.
But dont jump to the conclusion that Callaway would not, under the right circumstances, want to operate the former Spalding brands. The Hogan irons especially would make Callaway an immediate player in the better-player iron category. (Callaway says its the No. 1 maker of irons in the world. But although its irons have their own following among better players, Callaway irons in general carry a game-improvement reputation.)
TaylorMade-adidas has been famously tight-lipped about its plans, probably because of the strict controls and European business style of its German-based parent, the second-largest sporting goods company in the world. But back channel word is that TaylorMade would operate the brands, and do so aggressively. Its also possible that adidas could run the brands outside the TaylorMade umbrella.
Many accuse TaylorMade of simply trying to frustrate cross-town rival Callaway, and TaylorMade hasnt denied it. But theres not a lot of profit in inflicting frustration for its own sake.
In recent weeks, speculation has spilled over to other golf brands as well. Titleist looked like it might be in the picture as well, but it let the deadline pass for becoming a qualified bidder under court rules. Inside sources say Titleist was concerned about allowing a competitor to pick up a lot of extra capacity for cents on the dollar, but more worried about getting stuck with an antitrust mess. Titleist and its parent company, Acushnet, own about 55 percent of the golf ball market already.
As usual whenever a big event is expected in the sporting goods business, there are rumors about Nikes possible interest. But Nike isnt discussing the matter, and word is it is not an approved bidder.
The eventual landing place of Top-Flite golf might not raise a lot of questions among consumers. But the real question for whoever walks away from the auction will be, whos the winner? We may not know for a few years, until we see just how able the new owner-managers are.