Will Titleist still be Titleist?
Recently, Fortune Brands announced its plan to split into 3 companies. Keeping for itself the liquor business, which includes; Jim Beam, Canadian Club, and Makers Mark and brings in a cool $2.5 Billion a year.
They will be releasing Acushnet out into the world for companies and stock holders to fight over. Acushnet contains a few excellent Golf Brands including Titleist, Foot Joy, Scotty Cameron, and Pinnacle. They also used to pump out Cobra Golf Gear, but that was bought by Puma back in March.
So what does this mean for Titleist and FootJoy? Well they may get split up and taken over by someone completely different. Keeping them together could cause numerous foreseeable antitrust issues as explained by Terry McAndrew of GolfBiz.net:
“Potential strategic buyers linked in the past have included Callaway (ELY: NYSE), Nike (NKE: NYSE), Adidas, Bridgestone and Sumitomo Rubber. However, all of these potential suitors present significant antitrust issues. Adidas and Nike, for example, are #2 and #3 respectively in golf footwear and acquiring FootJoy in the #1 position would imply a major advantage to the successful buyer. Callaway and Bridgestone are #2 and #3 respectively in golf balls and acquiring Titleist and its dominate #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.”
So what do you think Rock Heads? Who is going to scoop up Titleist? Do you think the golf balls will still be as great? Do you think the Brands will still be as strong?
My uncle was once a VP at Wilson Sporting Goods, having worked his way up from the production line. Andy Fevers, as a lot of folks called him, showed me the logistical end of the business, which was one of the first industries to share component production, assembly lines, and customer service across brand boundaries. Wilson passed hands among parent companies 7 times during his time with them. While there were tense times, attempts to water down the product lines, and moves by management to split up the company into new brands before 1989, the company management stood its ground, maintained its research and development, and improved its supply chain. After 1989, management prevailed, and Wilson was relegated to discount stores and clearance centers. They seem to be coming back now, but it’s a long, hard climb. Acushnet has been a leader in golf development and patents for 80 years, in an industry that shares virtually everything. That’s an accomplishment. I hope the new management will keep in mind the risk and opportunity scale as they make their decision. Any golf company can become part of another’s supply chain, and the gaining company can reduce costs by eliminating duplication and exploiting technology. Acushnet has a place in the industry that’s pretty critical to everybody, but the interconnection of product lines and their production and supply chains (things that create profit as a group) are sometimes difficult and expensive to take apart. I think that Acushnet, if it moves, will follow a trail like Wilson did, becoming a subsidiary of a larger company, but maintaining its product identity.