Callaway Golf to acquire Jack Wolfskin for approximately $476M
Callaway Golf announced that it has entered into an agreement to acquire Jack Wolfskin for approximately $476M, subject to certain purchase price adjustments. Jack Wolfskin is an outdoor apparel, footwear and equipment brand. The company designs products targeted at the active outdoor and urban outdoor customer categories. Jack Wolfskin had net sales of $380M in FY18, based on preliminary unaudited results provided by Jack Wolfskin. Jack Wolfskin provides over 3,000 points of sale globally, including wholesale, company-owned retail and franchised retail stores. Post transaction, Jack Wolfskin will continue to operate out of its headquarters located in Idstein, Germany. The $476M purchase price values Jack Wolfskin at a multiple of approximately 12 times its FY18 adjusted EBITDA of $40M. FY19 net sales are estimated to be flat compared to prior year, but are expected to accelerate to mid-single digit growth over the mid- to long-term. FY19 adjusted EBITDA, excluding purchase accounting adjustments, is estimated to be approximately $33M, a decrease compared to the prior year as a result of incremental investments to build long-term sustainable growth as well as projected cost of living increases. The investments would include investments in design, marketing and infrastructure to allow for growth in Jack Wolfskin's core business as well as future expansion into new regions. Jack Wolfskin's EBITDA is estimated to reach $50M in 3-4 years, with long-term EBITDA margins forecasted to be accretive to Callaway's current EBITDA margins. Full year non-GAAP EPS is estimated to be 6c dilutive in year one and accretive in year two. Non-GAAP EPS excludes non-recurring transaction costs, amortization of financing fees, and incremental non-cash expense resulting from the purchase accounting adjustments. Full year GAAP EPS is expected to be 25c-35c dilutive in year one and approximately neutral in year two. The acquisition is expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions. Callaway intends to finance the transaction with a $476M term loan facility.