May
2
2011
Callaway and Blackstone Group to Buy Acushnet?
By Stephanie Wei under Equipment

Reuters reported last week that sources say the Blackstone Group and Callaway Golf are teaming up to place a bid on Fortune’s golf business, Acushnet (better known as Titleist and Footjoy), in a deal worth up to $1 billion.

“If you look at the size of their (Callaway’s) balance sheet, market cap and their cash flows, they would need a partner,” the source said.

Like any other auctions, joint partners may or may not decide to proceed with final bids.

The golf unit, which also makes FootJoy shoes and gloves, had revenue of $1.24 billion and operating income of about $80.2 million last year. It had about $100 million in cash flow last year, which could give it a valuation of about $800 million to $1 billion, sources have said.

“The business has had some lean years and I would (say) a multiple of about 10 times is where this deal should settle,” the source added.

Callaway and Blackstone declined to comment. But here’s this from a Fortune Brands spokesman:

“As we’ve said before, we are exploring the sale or spin-off of our industry-leading Acushnet golf business. Acushnet is a valuable company that can create significant value for shareholders through a sale or as an independent company. Beyond that, we don’t intend to discuss the process.”

PGA Tour player and finance guru Joe Ogilvie chimed in on the potential deal via Twitter, making two predictions:

1. If Callaway & Acushnet merge, w/Blackstone’s help, it will be death for golf magazines, maybe 1 or 2 survive at most.

2. If Callaway doesn’t get Acushnet, better known as Titleist for those at home, it has zero chance to stay independent for much longer.

If 1 golf co. buys another in a private equity transaction, you don’t need to advertise both brands, especially bad for print.

Bad for pro golfers as well, less money for endorsements. But industry needs consolidation, the golf business has been brutal for years…

I don’t know enough about the inner financial workings of the golf business, but I’m not sure I like a major company taking over another major company (there are only a few to begin with). Obviously we don’t know the details of the deal, so it’s tough to comment.