Callaway Golf Co. on Monday agreed to buy putter-maker Odyssey Sports Inc. from its parent, U.S. Industries Inc., for $130 million in cash.
The purchase would give Callaway, the No. 1 maker of golf clubs in the U.S., the leading putter used on the Senior Professional Golf Assn. and Ladies Professional Golf Assn. tours, the company said. Callaway's Big Bertha drivers are the tours' No. 1 drivers, the company said.
Carlsbad-based Callaway plans to use its international sales force to distribute Odyssey putters. Callaway generates only about $10 million in putter sales, and analysts estimate Odyssey generated about $35 million in 1996.
"We see a big potential worldwide--they've already got the best name in the U.S.," company founder and Chairman Ely Callaway said. Competitors include American Brands Inc.'s Titleist golf equipment unit, he said.
Callaway shares fell 75 cents to close at $36.88, while Iselin, N.J.-based U.S. Industries' stock rose 19 cents to close at $40.25. Both trade on the New York Stock Exchange.
The purchase is expected to dilute Callaway's per-share earnings by about 2 cents a share this year, and add a penny to 4 cents a share next year, said analyst Dennis Van Zelfden of Robinson-Humphrey Co. Van Zelfden kept his earnings estimates for this year unchanged at $2.03 a share.
The company doesn't plan to make any changes in Odyssey's management or labor force, its chairman said.
The sale is part of U.S. Industries' plan to sell its fashion-related units after its spinoff from London-based Hanson in May 1995, said U.S. Industries spokeswoman Diana Burton.
While U.S. Industries still has its Tommy Armour Golf business, that division will be sold "when the price is right," Burton said. Armour and Odyssey generated about $100 million in total sales last year, she said.
U.S. Industries said it expects the sale to generate proceeds of about $80 million and an after-tax gain of $50 million. Proceeds will be used to repay debt, U.S. Industries said.
The companies expect to complete the transaction by the end of August, pending regulatory approval, Burton said.