NKE, UA, Adidas - Titleist looking to go public, but is golf investable?
Acushnet Co (Titleist/FootJoy) is talking to banks about going public. Acushnet (once owned by Fortune Brands) was purchased by Fila Korea Ltd. In 2011 for a purchase price of $1.225bn. So naturally, the IPO is rumored to value the company at $2bn.
Titleist and FootJoy are among the best brands in Golf, and just about every 3-handicap PM who will be shopped the deal is likely to agree. But lets not forget that this is a low margin, operating asset intensive, high R&D business with two huge competitors (Nike and UA) who are jacking up the cost of growth by way of much more cash-rich core businesses.
Also, there is a net exodus of players from the game. Since 2007 (Economy & TigerGate) the number of people playing golf in the US is down by 5mm, or 17%. Rounds per player has gone up since then, showing that it is the beginner that has left the game. That's definitely the lower-spending golfer, but the fact is that today's beginner is tomorrow's expert.
Another thing to consider is that if we're talking about an IPO, it likely means that the company has been shopped to UA and Adidas (Taylormade), both of whom presumably balked. And lastly, in the heyday of golf (circa 1999/2000) Callaway flirted with a $2bn valuation. Today it is below $700mm. Titleist is a great brand, but is it 3 Callaways?
Perhaps it is. But they're going to have a tough round at this price.
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