Golf Galaxy, Inc. expects that its planned acquisition of The GolfWorks, one of the golf industry's sources for golf club components, clubmaking tools and supplies, and technical information, will have a positive effect on its retail store productivity, increase its service revenues, and expand its customer base.

The Golfworks, which was founded by Ralph Maltby, had sales of approximately $24.5 million in 2005. Maltby is said to be recognized as a technical expert within the golf industry, with his book a required read for all PGA pros. Golfworks CEO Mark McCormick, who is the brother of Golf Galaxy's chief marketing officer, Nick McCormick, will stay with the company and operate Golfworks as a wholly-owned subsidiary of GGXY.

The acquisition, which is expected to close in March, is based on a mix of cash, stock, and warrants. The purchase price consists of approximately $4 million in cash; Golf Galaxy common stock valued at approximately $4.5 million; and warrants to purchase 150,000 shares of Golf Galaxy common stock, valued at approximately $1.5 million. The strike price of the warrants will approximate fair market value based on the average closing market price for the 30 days preceding last week’s announcement.

Golf Galaxy will also assume approximately $5 million in debt from The GolfWorks.

All of the Golf Galaxy stores will feature GolfWorks store-within-a-store departments by fall 2006. The four stores opened by GGXY since November feature these departments and all new stores planned for this spring will include the shops. An additional 13 stores are currently being retrofitted.

While The Golfworks has a finished club business in addition to its component business, it is not seen as a significant portion of the overall revenue stream. However, GGXY sees some opportunity here to provide its own entry-level and beginner product that would ultimately replace its Outward Nine private label brand and others they buy into at those price-points.

The Golfworks does do business with other competing retailers that may not choose to move forward with them, a reality GGXY said it factored into its assumptions on the business.