Callaway Golf Company (NYSE:ELY) announced today it has acquired OGIO International, Inc. for $75.5 million in an all-cash transaction, subject to a working capital adjustment.
The acquisition enhances Callaway’s presence in golf while also providing a platform for future growth in the lifestyle category. Excluding non-recurring transaction and transition expenses, Callaway’s management expects the acquisition to be immediately accretive to earnings.
“We are excited about OGIO becoming part of Callaway and believe this acquisition aligns well with our stated goal of strategically developing growth in tangential areas,” commented Chip Brewer, President and Chief Executive Officer of Callaway Golf Company. “Furthermore, there is a robust strategic fit between the companies; both are strong brands with a sports heritage that share a passion for creating high-quality, performance-driven products. There is also significant overlap in our supply chains and go-to-market strategies, which should allow us to add value and create profitable growth.”
Callaway projects the acquired business will generate annual EBITDA of approximately $10 million after the acquisition is integrated and the majority of operational synergies are realized. Callaway estimates that the majority of the operational synergies will be realized within two years. The purchase price values OGIO at a multiple of approximately 7.6x this projected EBITDA. Callaway also expects to realize significant value from potential tax benefits associated with the transaction.
In 2017, OGIO is expected to contribute to Callaway approximately $45 million in revenue. After absorbing non-recurring transaction and transition expenses of approximately $7 million, OGIO is expected to be dilutive by approximately $0.02 to Callaway’s 2017 earnings per share but is expected to be accretive thereafter.
Callaway intends to finance the transaction with cash on hand and borrowings from its existing asset-backed credit facilities. Latham & Watkins LLP acted as legal counsel and Lazard acted as financial advisor to Callaway. Snell & Wilmer LLP acted as legal counsel and Robert W. Baird & Co. acted as financial advisor to OGIO.
Callaway Golf www.callawaygolf.com