Offers for Fortune Brand’s Acushnet golf business are due today. With Adidas still among the names mentioned on the list of final bidders we have a couple of things to consider to the extent it actually does emerge as the winner for Acushnet:
- First off, let’s look at the basic facts. Acuschnet owns some great assets. Titleist and FootJoy are two of the top brands in golf owning the #1 position in Balls and Footwear respectively. Market share numbers are dicey, but Acushnet has over 50%+ share of the golf ball market in the US.
- Nike dosen’t want this asset. Nike thinks it can beat Titleist and FootJoy organically in all categories. Whether you believe it or not is irrelevant. If Nike thinks it can, it won’t do the deal.
- That said, Nike will get involved in the bidding. They’d like nothing more than to drive the price higher to prevent Adidas from getting it on the cheap. Remember that one of the risks in this space had been that Adidas freed up close to $40mm per year with the NFL deal moving over to Nike in the 2012 season and could otherwise bid on athletes. If it wins Acuschnet, it’s going to be more focused on golf.
- What’s the one thing that will burn Nike up on this deal? This will be the one category where Adidas will arguably have a Footwear product that is more successful than Nike’s in FootJoy. (Adidas usually leads in apparel). The numbers speak for themselves. Even many Nike Golf die hards wear FootJoys.
- This is not a bank-breaker for Adidas. Regardless of the sale price – we could see anything between $800mm-$1.2Bn, its balance sheet can handle it without a hitch. Current net debt/total capital is 12%, and adding a billion in debt would get us to 25%.
- Not a good read-through for the toning market. When Hainer steps up acquisition activity, it usually means that a recent sales driver is waning. This was going to be the year of the International Toner.