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December 08, 2010

For now, it's business as usual for Acushnet's Titleist and FootJoy brands

Posted at 12:43 PM by David Dusek | Categories: Acushnet, FootJoy, Fortune Brands, Titleist

TITLEIST_LOGO What do Jim Beam bourbon, Moen bathroom sinks and Titleist Pro V1 golf balls have in common? They're all a part of Fortune Brands, but not for long. The company announced Tuesday that it will split into three different parts.

In a media release, Fortune Brands said it plans to become "an independent, publicly-traded company focused solely on its distilled spirits business." The release went on to say that the company plans to sell or spin off the Acushnet Co., it's golf business, which makes Titleist balls, clubs and accessories, as well as FootJoy shoes and apparel.

The CNNMoney video below explains some of the reasons why Fortune has decided to break up.

Golfers learning this news might logically have a few questions, so here are a few answers.

Will I be able to keep buying Titleist golf clubs and balls?
Yes, it's going to be business as usual at Titleist and FootJoy until the completion of a deal is finalized. In its release, Fortune Brands said its board of directors "has directed management to develop detailed separation plans for consideration and final approval by the Board. The company expects to complete development of these plans — including the structure, timing, and other related matters for each business — within the next several months."

In other words, nothing is going to change in the immediate future.

Titleist recently released its 910 line of woods and gave prototype Pro V1 and Pro V1x golf balls to its staff professionals to play. An updated Pro V1 and Pro V1x are expected to be released in early 2011.

If Acushnet gets sold, who would buy it?
Fortune Brands' release states that Acushnet has annual sales of $1.2 billion, so anyone looking to buy the company needs to have deep pockets.

One possible buyer could be a private equity firm. Another could be a large company already in the golf business. However, if a company like Callaway, Nike, Adidas or Bridgestone wanted to buy Acushnet, it could present anti-trust and intellectual property issues.

In his Web Street Golf Daily Pulse, Terry McAndrew writes:

"… All of these potential suitors present significant antitrust issues. Adidas and Nike, for example, are No. 2 and No. 3 respectively in golf footwear and acquiring FootJoy in the No. 1 position would imply a major advantage to the successful buyer.

Callaway and Bridgestone are No. 2 and No. 3 respectively in golf balls and acquiring Titleist and its dominate No. 1 position in market share would equally set off a series of complaints from those that lost out in a potential deal. Similarly Callaway, Bridgestone and Sumitomo represent golf ball product category intellectual property right antitrust issues.

An alignment between Titleist and anyone of those three would give the combined entity 40+% of the golf ball Intellectual Property Rights landscape. Navigating through antitrust issues would slow up any sale process and could require divestitures. Although there would be some financial synergies with any strategic buyer, the antitrust risks and delay coupled with the integration costs could outweigh those benefits along with the tax consequences that may influence the final sales price."

Is there a timeline for when things might happen with Acushnet?
The Acushnet Co. is based in Fairhaven, Mass. Local reporter Charis Anderson writes in South Coast Today, "Officials said they expected the process to move fairly quickly."

Given the assumed complexity of the process and any deal that happens, it seems safe to speculate that we're talking about months before something is finalized, not weeks.

Were Titleist Tour players like Davis Love, Geoff Ogilvy, Zach Johnson and Steve Stricker told about this before the announcement?
No. The announcement came from Fortune Brands, not Titleist or FootJoy.

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