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Customers shop at Golf Town's First Markham Place location in this file photo.Kevin Van Paassen

Golf Town, Canada's largest golf retailer, is set to be sold as its struggling U.S. parent company files for bankruptcy protection on Wednesday.

Investment firms Fairfax Financial Holdings Ltd. and CI Financial Corp. plan to acquire the Canadian operations of Golfsmith International Holdings Inc., which consist of more than 50 stores across the country, the sources said. Both firms are current Golfsmith debt holders. Golfsmith also has more than 100 stores in the U.S.; it is not clear what will happen to this part of the business. It confirmed Wednesday that it has filed for protection in the U.S. and under the Companies' Creditors Arrangement Act in Canada with the aim to restructure and shrink its store network, particularly south of the border.

Golf Town has been owned by Ontario Municipal Employees Retirement System's private equity arm since 2007 when it bought the chain for $240-million including debt. The company had 32 stores at the time.

Then in 2012, OMERS combined Golf Town with the U.S. Golfsmith business in a deal that added a heavier load of debt.

OMERS is not expected to retain an equity stake in Golf Town under the terms of the deal. Officials from the pension fund could not immediately comment.

The business of selling golf supplies has been challenged in recent years by stagnant sales and slowing growth of the sport. But as this country's largest specialty golf retailer, Golf Town has cornered a niche market while south of the border Golfsmith faces stiffer competition.

In Canada, Golf Town's major rival, Canadian Tire Corp. Ltd., which owns Sport Chek and other sporting goods chains, carries golf products but has closed its standalone Nevada Bob's Golf stores.

Representatives from CI and Fairfax could not immediately be reached for comment.

Canadian Tire, which was seen as a would-be buyer of Golf Town, would not comment last month.

Golf Town has shown signs of a turnaround in the past year or so after David Roussy took the top job at Golfsmith, sources close to the company have said. He is a former executive of Toronto-based Canadian Tire and has a better feel for this domestic market, they have said. He has moved managers back to Canada.

Golf Town has sharpened product and marketing strategies to better reflect Canadian consumer demand by, for instance, focusing more on fashion and lower prices, the company said last month.

Golf Town's $100-million (U.S.) takeover of the larger Golfsmith in 2012 went awry as the struggling U.S. chain subsequently took over management of Golf Town, running the Canadian chain from its head office in Austin, Tex., industry observers have said.

Golfsmith acknowledged in an e-mailed statement last month that "the last few years have been challenging for golf retailers, as a whole, and this includes Golfsmith."

Still, the privately held company said it has made changes to its Golf Town team and approach – bringing management back from Austin to the operations here and responding better to domestic consumer demand – resulting in "strong momentum" at Golf Town. It said it has enjoyed year-to-date sales growth at outlets open a year or more – a critical retail measure – and "material increases in online revenue and strong profit improvement."

Golf Town and Golfsmith officials could not immediately be reached for comment late Tuesday.

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