| Item 1.01 | Entry Into a Material Definitive Agreement. |
Agreement to Acquire Jack Wolfskin
On November 29, 2018, Callaway Golf Company (“Callaway”) entered into a definitive agreement to acquire Jack Wolfskin, pursuant to the terms of a Share Sale and Purchase Agreement (the “Purchase Agreement”) by and among Paw Luxco III S.à.r.l. (the “Seller”), Mainsee 1185. V V GmbH (a wholly owned subsidiary of Callaway which is to be renamed Callaway Germany Holdco GmbH) (the “Purchaser”) and Callaway. The Purchase Agreement provides that the Purchaser will acquire all of the outstanding shares of capital stock of JW Stargazer Holding GmbH, which owns the various entities constituting the Jack Wolfskin business (the “Acquisition”), for €418.0 million in cash, or approximately $476 million assuming a 1.140 Euro to U.S. Dollar conversion rate, subject to certain purchase price adjustments (the “Purchase Price”). The board of directors of Callaway has unanimously approved the Acquisition, the Purchase Agreement and the transactions contemplated thereby.
Callaway and the Seller agreed to customary warranties and covenants in the Purchase Agreement. Callaway has obtained warranty and indemnity insurance to cover, subject to certain limitations, losses resulting from breaches of the Seller’s warranties made in the Purchase Agreement. During the period from the date of the Purchase Agreement until the closing of the Acquisition (the “Closing”), the Seller has agreed to conduct the Jack Wolfskin business in the ordinary course and in a manner consistent with past practice and not to take certain actions prior to the Closing without the consent of the Purchaser.
The Acquisition is expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions. The Purchase Agreement contains termination rights for both the Purchaser and the Seller, including, among other bases for termination, if the Acquisition is not consummated within 90 days following the date of the Purchase Agreement, subject to certain extension rights.
In connection with the Purchase Agreement, Callaway entered into a debt commitment letter, dated as of November 29, 2018, with Bank of America, N.A. and JPMorgan Chase Bank, N.A. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide, subject to the terms and conditions thereof, $480 million of term loans (the “Debt Financing”). The Debt Financing will be used by Callaway to fund the Purchase Price for the Acquisition at the Closing.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 2.1 to this Current Report on Form8-K and is incorporated herein by reference. The Purchase Agreement has been attached to this Current Report on Form8-K to provide investors with information regarding its terms. The Purchase Agreement is not intended to provide any other factual information about Callaway, the Seller or any of their respective subsidiaries or affiliates. The warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement as of the specific dates set forth therein, were solely for the benefit of the parties to the Purchase Agreement, may be subject to important qualifications and limitations agreed upon by the parties for the purposes of allocating contractual risk among such parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to such contracting parties that differ from those applicable to investors. Investors should not rely on the warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties to the Purchase Agreement or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in Callaway’s public disclosures.
