Adidas-Salomon Makes a Play for Top-Flite

A Delaware bankruptcy judge is expected to decide Wednesday whether Callaway Golf Co. is entitled to preferred status in its bid to acquire bankrupt Top-Flite Golf Co.

Callaway, the Carlsbad, Calif.-based maker of Big Bertha drivers and other golf clubs, said last month that it had agreed to buy the golf club and ball maker for about $125 million as part of a Chapter 11 bankruptcy filing by privately held Top-Flite.

But in court papers filed last week, Adidas-Salomon, the giant sporting goods maker based in Germany, said it also had been in negotiations with Chicopee, Mass.-based Top-Flite and was prepared to pay $126 million for the company.

Adidas objected to bankruptcy provisions that would give Callaway -- the world’s No. 1 producer of irons, woods and putters -- status as the “stalking horse” or lead bidder, entitled to a breakup fee of $4.3 million and reimbursement of expenses if it is outbid at an Aug. 20 auction.

“We felt that the bid procedures were unfair to the estate,” said Joel R. Ohlgren of Sheppard, Mullin, Richter & Hampton, which is representing Adidas. “Why pay out $4.3 million when you don’t have to?”

Adidas’ negotiations with Top-Flite began in December 2002, but were “unaccountably cut off on June 2 as Top-Flite apparently agreed to an exclusive ‘negotiation arrangement’ ” with Callaway, Adidas’ filing says.

Ohlgren said he did not know whether Adidas had made a formal offer for Top-Flite during its negotiations. Adidas, which owns the TaylorMade golf equipment business, is based in Herzogenaurach, Germany.

Top-Flite, formerly known as Spalding Sports World, changed its name after selling the Spalding line to Russell Corp. in April. Top-Flite owns the Ben Hogan and Strata brands.

Larry Dorman, a senior vice president with Callaway, said Adidas’ objection did “essentially nothing” to the formal offer his firm had made because the judge had yet to rule.

“Anyone who wishes to make an offer will have to present an offer that is superior to ours,” Dorman said. “There is more to making” a superior offer, he added, “than just exceeding the purchase price.”

Callaway shares fell 59 cents Monday, or 3.9%, to $14.58 on the New York Stock Exchange.