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.
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This purchase would be terrible news for golf consumers. Callaway has a history with this sort of thing. Remember Ben Hogan golf clubs and Top Flite golf balls? Callaway acquired those brands after the 2003 bankruptcy of parent company Spalding, a long time industry leader. Try and find a new box of Strata golf balls or a new set of Hogan clubs. My guess is, the same would happen to Titleist brands, so if you enjoy playing Pro V1′s and Titleist clubs, you will be out of luck. This transaction would enable Callaway to kill one of it’s biggest competitors and would leave consumers with a lot less choice in the marketplace.
I disagree Matt. If they were to acquire the brand, I can’t see them letting it go the way of Hogan or Top Flite. Titleist is one of the most, if not the most, recognizable golf company in the world. The wiser decision would be to continue to operate the brand as independently as possible. The average consumer only knows the brand name, the parent company doesn’t matter to them. Titleist is synonymous with quality golf balls and equipment to multiple generations, and I don’t see that changing. Why wouldn’t they continue to operate the brand as long as it is profitable to do so? If a consumer goes in to the store, and has to chose between Callaway and Titleist, the parent company wins either way. As for this story, rumors of a purchase have been floating around the message boards for quite some time. To me, a large company outside the golf industry would be the most likely candidate to buy them out.
I’m surprised that Bridgestone isn’t making a play for Acushnet. They have the money and the Titleist brand would be golden for their golf franchise. FootJoy would put them in a leadership position in the golf apparel business, too.
A better buy than Firestone, I think.
Agree with @ MW – 0% chance they kill Titleist in terms of golf balls anyway. I could see where they downgrade the club branch at Titleist- that is not a market leader. On the other hand, Calloway is the opposite-great clubs, balls are good, but not their strength. Probably leave Titlest clubs and Calloway balls out there, but would attempt to carve out a niche for each one of them – appeal to pros (or wannabes) only, or down market or something.
I’m hitting these Titleway irons a mile and my new Callajoy shoes feel great!
Not a chance the Titleist ball goes away. Callaway could be buying a profitable competitor and that will help what is rumored to be a rather shaky balance sheet at Callaway. Arguably, they could be making this acquisition at the tail end of a recession so there might be tremendous upside. If the industry stays flat, then their new Titleist ‘business unit’ continues to make a profit in less than great conditions, provided they manage it correctly. No reason why this can’t be just a ledger sheet acquisition with very little change.