PUMA Bags Cobra Golf in Deal with Fortune

Over the weekend, golf phenom Camilo Villegas won the Honda Classic, shooting 13 under for the tournament. It was his third title.

It was also a big win for Cobra Golf. You see, Villegas is a so-called "brand ambassador" for the company and uses six Cobra clubs in his golf bag.

But that's hardly the biggest news for Cobra this week: On Wednesday, its parent, Fortune Brands (FO), announced that it has agreed to sell the company to PUMA (PMMAF). The deal includes inventory, intellectual property and yes, key endorsement contracts. Besides its deal with Villegas, it also has a contract with English pro Ian Poulter.

The price tag of Cobra was not disclosed.

The Cobra Way

Cobra was founded in 1973 and developed its first club a few years later. The first utility wood, it was called the "Baffler." The company smartly secured a patent and grew this new category. In fact, Cobra continued to focus on innovation. After all, golfers always want to get an edge, right?

But Cobra also realized the importance of getting validation from top players on the PGA. To this end, the company signed a contract with golf legend Greg Norman in 1991. That began another critical part of Cobra's growth, and the company sold out a few years later. In the deal, Norman pulled down $44 million.

While being part of a larger organization can be stifling, Fortune has not held back Cobra. The company understands how to nurture brands and find a managerial balance. Some of Cobra's latest clubs include the ZL and S2 drivers as well as the new Baffler Rail Hybrid.

So why sell Cobra? According to Fortune, the company wants to focus on its other golf brands, such as Titleist and FootJoy, which it operates under the umbrella of its subsidiary, Acushnet Process Company. Apparently, those brands have stronger growth profiles.

A New Direction for PUMA

Of course, PUMA's main business is in footwear, apparel and accessories, so its deal for Cobra is definitely a major extension of its brand. But it's not an unreasonable direction for the company to expand: Certainly its rival Nike (NKE) has had success with its golf business.

The details are a bit sketchy on the deal so far, but Fortune says the transaction will dilute 2010 earnings by $0.02 per share before it takes a one-time gain of $0.05 per share. The company has said it will provide more details about the transaction on its first-quarter earnings call.
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