The Top-Flite Golf Company and affiliated companies have reached an agreement for the sale of substantially all the company’s golf-related assets to Callaway Golf Company. The proposed sale is pursuant to section 363 of Chapter 11 of the U.S. Bankruptcy Code. The total price to be paid by Callaway Golf for the acquired assets will be approximately $125 million, subject to certain adjustments.
To facilitate the sale, Top-Flite Golf on Monday filed a voluntary petition for relief under Chapter 11 with the U.S. Bankruptcy Court for the District of Delaware. Top-Flite Golf’s international operations are part of the sale, but are not part of the bankruptcy filing.
Under a section 363 asset sale, all of the assets of a company are sold to a purchaser free and clear of virtually all liens, claims and interests. The sale of Top-Flite Golf’s assets to Callaway Golf is subject to Bankruptcy Court approval. Top-Flite Golf expects to complete the sale to Callaway Golf within 70 to 90 days. Completion of the transaction also is contingent upon government review under the Hart-Scott-Rodino Pre-Merger Notification Act.
Top-Flite Golf said that it has adequate cash balances to fully fund operations during the reorganization process and will file various motions to enable it to meet obligations related to certain customer practices and programs, import obligations and other similar charges. As in all Chapter 11 cases, subject to court approval post-petition obligations to vendors, employees and others will be satisfied in the normal course of business without the need to obtain further court approval.
Jim Craigie, president and chief executive officer of Top-Flite Golf, said, “The proposed sale of our assets to Callaway Golf will allow Top-Flite Golf to remain a strong competitor and maximize our value for customers, employees and other stakeholders. Callaway has expressed interest in keeping and investing in our brands, continuing an association with Greater Springfield and offering employment to a substantial portion of our employee base.”
Craigie continued, “In the meantime, Top-Flite Golf will maintain business as usual during the reorganization process. We do not expect any interruption in our supply chain, production or distribution, and all vendors will be paid in the normal course of business for post-petition obligations. All of our products will continue to be available, we will continue to honor all warranties, and we will move forward with the launch of our new Top-Flite Infinity line with substantial marketing support.”
In making its filing to the Bankruptcy Court, Top-Flite Golf noted that the large debt load inherited from its 1996 leveraged buyout, as well as worldwide overcapacity in the golf ball market, have resulted in deteriorating sales, margins and market share. Management has concluded that in order to maximize the value to all stakeholders, that Chapter 11 protection is necessary to stabilize Top-Flite’s business and preserve its value during the process of selling its assets to Callaway Golf.
“In the consolidating golf industry, even if Top-Flite Golf were to eliminate our debt load from the 1996 leveraged buyout through Chapter 11, we could not survive in the current marketplace against existing strong competitors. We have carefully considered all possible alternatives, and the combination of a bankruptcy filing and an immediate Section 363 sale is the only viable course of action for the Company’s future,” Mr. Craigie said.
Ron Drapeau, Chairman, President and CEO of Callaway Golf, said, “Our acquisition of the Top-Flite assets free from the significant debt load that burdened the company should permit us to reverse the recent decline of the Top-Flite brand in the golf ball marketplace. We also believe that our consolidated golf ball operations will provide Callaway Golf and its shareholders with the solution to the profitability drain that has dogged our golf ball business since start-up. Moreover, the acquisition of the Top-Flite and Ben Hogan brands in golf clubs permits us to participate in categories and channels where the Callaway Golf brand has been absent or had little presence. Overall, we see this as an opportunity to compete effectively in a broad range of golf equipment business segments. We have every reason to believe that we will receive all needed approvals to complete the transfer of these Top-Flite assets to Callaway Golf later this year.”
Top-Flite Golf also announced today that it has retained Kroll Zolfo Cooper LLC, the financial consulting firm specializing in corporate restructuring, to work with senior management and assist the company through the bankruptcy and asset sale process. Kroll Zolfo Cooper executives have been appointed to the following positions: Kevin Golmont will serve as Chief Restructuring Officer, and Andrew Howley will serve as Interim Chief Financial Officer.
