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Interest in Callaway Builds, Nike Said Among Suitors

Nike could be interested in making a play for Callaway Golf Co.

NEW YORK — Nike could be interested in making a play for Callaway Golf Co. — but it’s not the only company interested.

Industry speculation about Nike buying Callaway heated up last week. “We won’t comment on any acquisitions,” a Nike spokeswoman said. She declined to comment about whether Nike had been in talks with Callaway, a $900 million Carlsbad, Calif.-based company that owns Callaway Golf, Odyssey, Top-Flite and Ben Hogan.

According to published reports Friday, two Boston buyout firms, Bain Capital LLC and Thomas Lee Partners, have also shown interest. Spokesmen for Bain and Thomas Lee declined comment. In May, Thomas Lee Partners teamed up with Fidelity National Financial to submit an unsolicited bid, according to The Los Angeles Times. FNC chairman and chief executive officer William Foley 2nd did not return a phone call Friday.

Brad Holiday, chief financial officer for Callaway, declined to comment about an acquisition.

He did confirm that in June Callaway said it “received a mild inquiry and the company is exploring all strategic opportunities.” At last month’s annual shareholders’ meeting, the company acknowledged it has hired Lazard Ltd. to explore its options.

In terms of Nike’s interest, one senior athletic industry executive, who asked not to be identified, said Nike has had Callaway on its radar for six months or more, but “the price was fluctuating.”

“They missed out on The North Face a long time ago. It was dangled in front of them and they let it go because of ACG [the brand’s label aimed at outdoor enthusiasts]. The North Face [business] has continued to grow,” he said. North Face is now owned by VF Corp.

Buying Callaway would fit in with Nike’s strategy to acquire ancillary businesses as it has with Cole Haan, Converse, Starter and Bauer. “It makes total sense, but Nike said in its last [earnings] call that it is not in an acquisition mode,” he said.

With Callaway under its umbrella, Nike, which sponsors Tiger Woods, would be in a better position to square off against Greg Norman, the Reebok-owned golf label named after the pro golfer. According to sources, the brand’s namesake was said to be blindsided by last week’s Adidas-Reebok news and was peeved Reebok honcho Paul Fireman had not kept him in the loop.

Callaway last week ended a yearlong search for a chief executive officer by naming George Fellows, a former Revlon ceo who has been a consultant for the past five years. Holiday declined to comment about whether acquisitions are a priority for Fellows.

Fellows, who also serves as Callaway’s president and a director, has 40 years of experience in the consumer goods business. His experience would seem to sit well with Nike’s ceo William Perez, another veteran of the consumer products arena who took over the mantle from Phil Knight last year.

In June, Callaway extended its endorsement deal through 2010 with Hall of Fame golfer Annika Sorenstam, whom it first signed when she turned professional in 1993. Callaway, along with Nike and other leading sports brands, is keeping close tabs on amateur sensation 16-year-old Michelle Wie, who is expected to have a windfall of sponsorship deals when she turns pro. Holiday declined comment about whether Callaway is interested in signing the teenager, other than to say that is not something the company would discuss unless a deal was reached.

Another point of common interest is China, where both Callaway and Nike market their products. “China is obviously a market of interest and it is also a challenging market,” said Holiday, adding the brand has a small presence there through a distributor. Golf has not yet taken off in China as most of its 1.4 billion residents have never picked up a golf club.