American Brands, maker of Titleist clubs and balls and Foot-
Joy gloves and shoes, agreed yesterday to acquire club maker
Cobra Golf for $700M, or $36 a share (Cobra Golf). The
announcement caps "months of speculation" that American Brands
would acquire a premium club maker -- most likely Callaway Golf
or Cobra -- according to Heidi Evans in this morning's WALL
STREET JOURNAL. Analysts say the move "will strengthen American
Brands' position as the world leader" in the $4B golf industry,
according to Standard & Poor's rating. Evans reports that
"analysts agreed" that "the Cobra name was probably worth a
premium price." Cobra Golf rose 7 7/8 yesterday upon news of the
buyout. American Brands dropped 2 1/4 ("Nightly Business
Report," PBS, 12/18). CNN's Jan Hopkins: "Analysts say the deal
will enable Cobra to better compete with its chief rival,
Callaway." Callaway was down 1 yesterday (CNN, 12/18).
SHARK BAIT: Golfer Greg Norman, who owns a 4% stake in
Cobra, made an estimated $5.86M profit on the acquisition,
according to Paul Tharp in this morning's N.Y. POST. Tharp
reports that the deal will benefit American Brands, which
currently "doesn't have the golf club technology and player
following" of Cobra. Norman endorses Maxfli golf balls, but is
"expected to switch his golf ball endorsement to Titleist" when
his deal with Maxfli expires in '96. Analyst Shelly Hale Young
of Hambrecht & Quist: "This deal is making Greg richer than he
already was, and he won't have to worry about world tours
anymore" (N.Y POST, 12/19).
COBRA'S MARKET: Sandra Black writes in this morning's USA
TODAY, "In buying Cobra, American Brands is betting that demand
for high-priced golf clubs and accessories will grow as baby
boomers approach retirement" (USA TODAY, 12/19). The WALL STREET
JOURNAL's Evans reports Cobra "has experienced explosive growth
over the past few years," with sales for the first nine months of
'95 at $152M, up from $35M for all of '92. (WALL STREET JOURNAL,
12/18). In L.A., Margaret Ramirez cites analysts who say
American Brands will provide greater resources for advertising
Cobra needs to promote its new lines, including a new Norman-
endorsed lightweight titanium oversized driver (L.A. TIMES,
12/19).
