Fairfax and CI Sign Deal for Golf Town as U.S. Corporate Parent Restructures

An investor group led by Fairfax Financial Holdings Ltd. and CI Investments Inc. have signed a deal to buy Golf Town Canada Inc. as its U.S. parent Golfsmith International Holdings restructures its debt under court protection from creditors.

The deal is scheduled to close on Oct. 31. Fairfax and CI already own 40 per cent of the debt of Golfsmith International, Golf Town’s U.S. parent. Golf Town currently has 55 locations in Canada and 109 stores in the United States, but that number is expected to shrink as all Golf Town locations not included in Wednesday’s deal will be closed. It’s not immediately clear how many Golf Town locations the two Canadian investment firms are buying.

Ontario pension fund manager OMERS acquired Golf Town in 2007 on an open market for $240 million, and afterward combined U.S. based Golfsmith to the company for an extra $97 million US in 2012.

As indicated by bankruptcy filings, Golfsmith today has liabilities of up to $500 million US. The chain is filing for creditor protection in the U.S. and Canada.

The chain has been caught up in an industry-wide financial crunch following a period of rapid expansion. While golf is still a popular leisure activity in Canada and the U.S., numerous apparel makers and sellers and individual courses have closed in recent years.

“Golf Town seemed to buck that trend for the past 15 years,” said Marvin Ryder, a marketing professor at the DeGroote School of Business at McMaster University in Hamilton. “We saw Nike get out of the business earlier this year, so it’s no surprise to see a retailer is hurting — there’s just not enough demand to carry that big of a chain.”

“Even though golfers are very passionate, they’re still the same number,” Ryder said.
Ryder said he thinks there’s probably a future for the chain, but on a much smaller scale. “The big-box store model requires a big turnover of equipment, shoes and clubs,” he said.

While there are more rounds of golf being played today than any time in recent memory, those rounds are to a great extent being played by the same individuals as couple of new players are taking up the game. That implies less demand for golf apparel and equipment that stores, for example, Golf Town offer.

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