Published reports last week had adidas-Salomon making a $135 million cash bid for Top-Flite Golf Company, topping the $125 million offer made by the appointed stalking horse, Callaway Golf Company. The bids are part of the 363 asset sale required in Top-Flite’s Chapter 11 bankruptcy case and appear to be the only two bids received by the deadline date.

In advance of the bid, adidas-Salomon issued 400 million euros ($434 million) worth of debt convertible to around four million of its shares. A Reuters report said that adidas had indicated that the bond issue would help improve its debt situation and financing terms and the cash would “help line its pockets ahead of an auction” for Top-Flite Golf Company.

Top-Flite filed for Chapter 11 protection in early July so they could conduct a Section 363 asset sale that enables Callaway to acquire the company free and clear of virtually all liens, claims and interests in a deal announced June 30, 2003.

adidas-Salomon and others cried foul shortly thereafter and were able to get the court to drop the $3.75 million breakup fee and expense reimbursement provisions initially proposed as a part of Callaway Golf's bid. Any competing bid must also exclude any request for breakup fee or expense reimbursement.

While the adidas bid appears to be higher than Callaway’s initial offer, all suitors submitting a bid by August 27th and deemed “qualified bidders” by the court will be able to participate in the Sept. 3rd auction.

Top-Flite will select the best qualified bid presented during the auction and will have to make the final determination if the adidas-Salomon bid would likely be consummated if selected. The Post report said Judge Mary F. Walrath will evaluate the adidas bid and determine whether it does in fact exceed Callaway's offer. Both come with terms and conditions that affect the ultimate value to creditors, according to the report.

Callaway has reportedly agreed to continue all but three of Top-Flite's 43 professional endorsement deals. Golfers Colin Montgomerie, Matt Weibring and D.A. Weibring will supposedly be dropped. A group led by Montgomerie has petitioned the court to set aside $500,000 from the sale of the company to cover their Ben Hogan equipment endorsement deals. Reports indicate that adidas would terminate all contracts.

Analysts at Advest initiated coverage of Callaway Golf on Wednesday with a “neutral” rating, indicating that its sales growth trends have deteriorated since Q1 and that they are “apprehensive” regarding the company’s plan to acquire Top-Flite, in order to stem its golf ball business losses.

>>> This sounds an awful lot like the Tennis guys fighting over money-losing ball share…