Titleist To Spin Off Or Be Bought By Another Golf Equipment Maker?
by Charles Boyer on Dec 1, 2010 1:19 PM EST
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Big changes may be coming to the Titleist brand of golf equipment, as weell as FootJoy and others.
That's due to the ultimate owner of the company, Fortune Brands, being in the midst of a stock market battle that may well see the highly diversified conglomerate splitting itself up into smaller companies. Some of those companies will likely be sold to other large firms, and it is entirely possible that others will become stand-alone firms responsible for their own fates.
Some may recall that an intermediary company -- Acushnet -- holds ownership of the Titleist brand. Acushnet is, of course, owned itself by Fortune Brands.Titleist is not the only golf-related Acushet brand: also under its umbrella are FootJoy, Pinnacle and Scotty Cameron. Cobra Golf was also once part of the Acushnet portfolio, however, it was sold earlier this year.
While nothing concrete has been announced, august financial publications such as the Wall Street Journal are reporting that Fortune Brands is working with activist shareholder William Ackman to split the company very soon, with a possible announcement of their plan due perhaps before the end of the month. Ackman and Fortune Brands have refused to comment thus far, but the rumors are strong and believable enough that Fortune's share price on the New York Stock Exchange has risen nearly 8% since they began.
So how would all of this affect Titleist, perhaps the most venerable of all the current brands in the golf equipment marketplace? And how would other Fortune/Acushnet brands be affected?
In general terms the key to the divestiture of conglomerates like Fortune into their constituent firms is the idea of "unlocking shareholder value." That is what it sounds like -- together the companies are not as valuable as they are separately when added together. Say you had owned $40 shares of Tyco, another former conglomerate, before they divested themselves a couple of years ago. When the company split itself, you received shares of all of the new firms that were created, and today, the total value of the individual shares adds up to a lot more than the pre-divestiture price of the former parent company.
That's why Fortune is in play, and when it starts to spin off its golf-related brands, many of those brands may be temptingly attractive to other golf goods makers. It's entirely possible that a company like Callaway may want to add Footjoy to its portfolio, for example. Nike might be tempted to add Pinnacle so it can add to its bargain ball offerings. Maybe TMaG (TaylorMade adidas Golf) might want to replace its own smaller golf ball operation with that of Titleist. That's all speculation, but it's all speculation within the realm of reasonable possibility.
On the other hand, Titleist is a company that has a strong enough market presence to make it possible that it could exist on its own and continue to prosper even in an uncertain marketplace for golf goods. They are the entrenched top brand in golf balls, the most replaced form of golf equipment, and they have healthy sales of their clubs, which are especially popular with higher-skill golfers. Where there is golf, there is Titleist, and no matter the outcome of the stock market reindeer games that surround the company, it's almost a lock that Titleist will continue to be one of the (if not THE) leading brand in its market.
Nick Green of Bethesda Maryland writes the MacDuff Consulting blog, and he had some interesting comments today about the future of Titleist as a possible M&A (mergers and acquisition) candidate:
Firstly Callaway. I don't see this one. As much as Callaway would like to buy their nemesis, their market capitalization of $450M isn't going to support an acquisition of Titleist's reported $1B plus sales.
Nike and Titleist together. In England, we like to say "like chalk and cheese". In America you say "oil and water". It means the same thing! The culture clash would keep HR busy for an eternity. Not going to happen.
TMaG (TaylorMade adidasGolf) is another potential candidate who would be anxious to get their hands on Titleist's hugely profitable golf ball business. They certainly have the money as the German giant, adidas generates revenues that the golf business can only dream about. As well as facing US monopoly issues, rather like Nike I just don't see the cultural fit.
The natural suitor comes from the East - Japan, Chaina, Taiwan, Korea. They have the money, especially with the exchange rate the way it is and they like "blue chip" brands like Acushnet. The company throws off a good amount of cash and it would be a great story for a Far Eastern company to own this prestigious US brand.
It's all conjecture at this time but good fun to speculate.
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This has been in the rumor mill for a couple of weeks. Personally, I’m still pulling for Top Flite to step up – just to see Top Flite ProV1 on a box. :-)
How about Titleist (a Yum Foods subsidiary ?) You’ll get a free taco with every driver.
Cobra isn’t a part of Acushnet anymore – they are a Puma company now.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat
Yep, right about Puma
Thanks Wikipedia. My bad on that.
by Charles Boyer on Dec 1, 2010 1:31 PM EST up reply actions
Yeah, lets hold a vote, and if it's
for Top Flite, we add it…anything else we do a punch, but not too good a one so it can’t be counted…..All in favor say Yea, not in favor be still…..See Court, all the votes have been counted, and we win 2 to zip…..STUB
par ? what’s that ?
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat
A Mizuno/Titleist maybe?..same spirit of the game.
some editions of their muscle back even look the same. A lot of their forged club heads are already made in japan. Muira used to make them a few years back. I don’t know who does now. Anyway, by letting the Japanese own Titleist, at least we’ll be sure that quality will be a standard.
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Are you going to have 2 sets of traditional irons from the same company ? Titleist and Cobra worked together fairly well for a while because Cobra did the advanced, high tech clubs, and Titleist kept the traditional look and worked in Cobra’s technology as it became “traditional”.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat
just saying..anyway, most of the customers are not aware of the relation between
those companies. And Mizuno does have a hight tech department.
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by Saint-just71 on Dec 1, 2010 11:18 PM EST up reply actions
but you're right they would target the same players on their traditional irons...
Or Mizuno could shift to a all high tech companie leaving Titleist alone on the traditional design market.
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by Saint-just71 on Dec 1, 2010 11:21 PM EST up reply actions
Seems like Titleist and Mizuno are such high profile companies, it would be difficult to keep it out of people’s minds that they are the same company.
But Mizuno does have a high tech department. Look at their MX series of clubs. Except for their traditional forged faces, they are some high tech, game improvement clubs, as are their hybrids and fairway woods.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat
never tried the MXs, only the MP68...great clubs.
but I do like the feel of a Titeist 681 better. My bro in law plays mizuno drivers and woods but i just didn’t like them.
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by Saint-just71 on Dec 1, 2010 11:40 PM EST up reply actions
as u can see it’s been some years i haven’t been in a golf store for try outs :-)
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by Saint-just71 on Dec 1, 2010 11:47 PM EST up reply actions
Not really difficult
While it would certainly be news for some time if Mizuno were to acquire Titelist, the public would almost forget about if the two had separate marketing efforts and maintained their own profiles and identities in the marketplace. They might have some difficulty with overlapping product lines, but that could be gotten around by some smart product management.
Having worked for a well-diversified conglomerate and inside a very well diversified company in that (meaning our product range was almost a conglomerate in itself) I have seen that state of play before.
by Charles Boyer on Dec 2, 2010 8:06 AM EST up reply actions
That makes sense. I guess my head went to the present users and how they might react if their manufacturer was all of a sudden making club for “the enemy” even though they had come under the same umbrella.
People choose one or the other because they perceive a difference. If they are all coming from the same place, it seems like people will wonder which one changed.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat
And oddly enough, there are what, three or four places in the world that make heads for irons? I don’t recall the exact number, but was told by a Tawainese co-worker that he once worked at a company that made iron heads for two very distinct competitors in the golf market.
by Charles Boyer on Dec 2, 2010 1:59 PM EST up reply actions
some of Callaway and TM's heads are made in Thailand (club heads..)
No wonder why there’re so much copies..I know the forged TM and Titleist were made in japan for a while both by Miura. The funny thing was that both had it notified on their web site htat their heads were forged by a master blacksmith in japan, but nothing was said about who it was. And nothing either on the Miura’s web site. In Japan you could find the same clubs under both names (Titleist/miura – TM/Miura)
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Interesting...
Thanks for the story.
I write about golf at www.tees2greens.com, too.
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