Golfsmith to continue aggressive expansion after Golf Town acquisition

With the combined Golf Town/Golfsmith retail franchise planning to continue its ambitious expansion strategy, even as the powers-that-be decide what to call the new company, rival golf equipment suppliers have to be at least somewhat anxious about their own futures.

“We’re in a very competitive business so we are an aggressive competitor,” Sue Gove, Golfsmith’s president and chief operating officer, warned rival equipment merchandisers. Gove spoke with us by phone on Monday following the announcement that OMERS Private Equity, which owns and operates 54 Golf Town stores across Canada and seven in the Boston area, would extend its reach into the U.S. market with an almost $100 million acquisition of leading U.S. retailer, Golfsmith.

Nick Green, president of Macduff Consulting in Bethesda, Md., said the estimated $96.8 million acquisition price was in line with the state of the industry.

“[Golf retailing is] a tough business to make money in,” Green told us via e-mail on Monday, “and the purchase price seems to reflect that.”

The transaction is expected to close in the third quarter of 2012 and will create the largest golf retailer in the world. Gove, who will become president and COO of the new corporation, while Martin Hanaka, Golfsmith’s chief executive, will assume the same title at the combined entity, outlined the new firm’s expected expansion strategy. The name of the new company remained under wraps, but Gove said that all U.S. Golf Town stores would be redubbed Golfsmith, while those in Canada would retain their original monikers. The conversion will happen sometime this fall, she said.

In addition, Gove noted that Golfsmith — which has been in business for more than 40 years and operates as an integrated, multi-channel retailer — would continue to roll out new brick-and-mortar locations to add to the 85 it currently operates throughout the U.S. On the heels of the grand opening of its Cleveland, Ohio, store on May 11, Golfsmith plans four more new stores before the end of the year, with 12 more coming in 2013, she said.

Golf Town began its U.S. expansion last year, when it invested $25 million into opening the Massachusetts stores in a take-no-prisoners venture that moved the company south of its border. At the time, then-president Stephen Bebis told us his firm “would spend more money in golf marketing than anybody has ever seen.”

While some observers questioned the timing of Golf Town’s move into the Lower 50 in 2011, Smith College economist Andrew Zimbalist was not one of them. “It usually makes a little more sense to anticipate economic strength than to invest when the strength is already there,” he told us at the time of the expansion. “Successful investments come before an economic peak, so it makes perfect sense for [Golf Town] to do this.”

As for what the merger means for the golf-retail business today, Zimbalist was bullish on the outcome for buyers of gear and apparel.

“Given the state of the economy and weakening in the number of golfers, it is not surprising to see further consolidation in the retail market,” he told us on Monday via e-mail. “I also think that there is enough competition in this market so that this merger will not result in higher prices to the consumer.”


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