Ramifications Of An Acushnet Merger?

I know the site being down for some on parts of Friday and Saturday probably led to less posting, but I was surprised how few of commented on the news that a hedge fund sweetheart wants to break up Fortune Brands and potentially pawn off its Acushnet division to a Nike or Callaway.

It is upsetting to envision a world without uncomfortable, overpriced shoes that would fit beautifully in Pat Boone's closet. And what will Jim Nantz do for extra income? Frankly, the number of ways in which an Acushnet-emasculated world may just be too painful for most of you to come to grips with.

But there is also the matter of the golf ball, the governing bodies and the perceived fear of a lawsuit. Acushnet CEO Wally Uihlein has long had the USGA and R&A cowering in fear of a lawsuit over equipment regulation even though he's suggested his brand's loyal buyers would jump ship if that day ever arrived. Yet imagine if this hedge funder gets his way and Acushnet is folded into another manufacturing giant. Could this have ramifications for distance regulation questions? And how about the industry in general?

Comments

[chico]

Dont think Callaway could afford it so I guess its there for Nike.Something of a monster.
Would be interesting to see the 'no Wally' effect.Dont suppose any of the ball makers will want to lose their money tree however.

[rollie]

Certainly matters would be no better. Callaway has already shown that it is willing to ignore usga regs and Nike's brand identity is anti establishment. That wont change. The shoes will get uglier either way.

[Ludell Hogwaller]

This is all being done to allow some industry insider to finally get his hands on the secret formula of the "Club Special".

[Ky Laffoon's Ghost]

Actually, IIRC my good friend the Hornet took my other good friend, the Retired Badger Pro, to task for the latter's disunderstanding of modern economics. Which means that it is OK for a Master of the Universe to chop up a company into its respective parts if doing such would make him some money in the short term, the longer term societal costs be damned. My friend needs to re-read his David Ricardo and Adam Smith. Or a recent article on the plight of the Simmons Bedding Company will do.

As for the shoes, I got a pair of Ikons a couple of months ago at a decent discount from my Pro Shop. They aren't THAT ugly and they are very comfortable.

Ludell, you make me laugh. Again. We are both showing our age, I fear, even though back then I played golf maybe twice a year.

This whole discussion is absurd, though. Can you imagine what MLB would say to Rawlings in a similar situation? Not that Bud Selig strikes me as much besides a go-along, get-along kind of guy. But come to think of it, until a player or spectator is impaled by a shard from a maple bat they won't be outlawed. Oh, wait...
http://news.lalate.com/2010/09/20/tyler-colvin-impaled-sparks-maple-bat-controversy/
Never mind.

[Del the Funk?]

I wonder if the DOJ would approve a merger between Titleist and Callaway

[jb]

Ah a master of the universe getting control of the ball making technology. I'd like that - I'm tired of being a short knocker. Get a ball with some distance.

Actually the breakup of Fortune Brands is what the market should have commended some time ago. Now the question becomes whether W. Driver and Goldman Sachs are involved.

jb

[JL]

When Scotty Cameron's contract expires, he probably won't be able to negotiate as good as a deal as in the past. He could be a freelancer?

I can only imagine whoever acquires Titleist, they'll ruin it, there is no upside, all downside, from a consumer standpoint.

[Media driven]

I doubt company taking over would alter much including Nantz as spokesman (he'll be there as long as Wally is, maybe longer). The story said Acushnet profits were down, but overall it's been highly successful and profitable as Cadillac of balls and that not likely to change. Uihlein has been instrumental in keeping USGA and R&A on defensive and he seems to relish that role. I'd love to know how much they pay Nantz, Kostis, others including players.

[digsouth]

DEL.


They let banks and oil companies merge and screw the pooch. what's a couple of hobby groups?

and Phone companies....lol....

How's is all working out for the consumer?


Geoff.....to pssed to post. Bean counters and top level money hose stockholders and consumers again.

[chico]

Media-if you have a Tour card and use a Titleist ball,driver and FJ shoes then its $70k.Dont know about the superstar wages.

[Sunil]

The buyer could very well be an Asian (private equity) firm..that's where the money is for the forseable future.

[Tom T.]

When Callaway acquired the Ben Hogan brand, the Ben Hogan eventually disappeared. Maybe Callaway plans to let Titleist disappear.

[OWGR Fan]

@Tom T..... Callaway never wanted the Ben Hogan brand/line to begin with. They had to take it when they bought Top Flite for TF golf ball patent portfolio as Top Flite owned the Ben Hogan company at that time.

[OWGR Fan]

Doubt Callaway could afford to obtain Acushnet at this time. Nike and TaylorMade/Adidas seem much more likely landing spot if this happens.

[fatgoalie]

Fortune Brands contacts extend far beyond the golf world.
For the ball business alone, there is huge value.
As posted earlier, look out China or Korea!

[Del the Funk]

digsouth, arguably the DOJ could have serious anti-competitve concerns about the combination of the Callaway and Titleist ball operations.

JL, whoever acquires Titleist/Acushnet might actually improve it. Let's not forget that the Acushnet braintrust absolutely destroyed the Cobra brand after they acquired it.

[JL]

Del the Funk----Hope you're right, the culture will be at risk, most mergers don't really work well.

Agree on the DOJ but I think there is political pressure to make deals happen given the anemic business climate and recovery.

The real interesting part of this story is who'd be the buyer, at least for me.

[Tom T.]

@OWGR Fan: Thanks for the info on the Callaway-Ben Hogan deal. I did not know that. I do miss the Ben Hogan brand/line.

[Erik]

If there is serious discussion of a break-up forced by the same knucklehead that ripped Tim Hortons out of Wendys International, then expect a management buy out funded by some private equity firm (KKR?) or perhaps a value investor like Berkshire Hathaway. Remember we won't be in a depression forever and there is significant value in a premier brand like Acushnet. Now way that US regulators would allow a merger - look what Adidas had to do just to get Reebok. Besides with net sales for the first nine months of this year at 1.008 $B I'd be surprised if the names that pop to mind immediately truly have the resources to make it work.

Cheers,
Erik

[JPB]

If you're a fan of Acushnet the best thing that could happen is that it gets acquired by Berkshire Hathaway but don't hold your breath, Buffett rarely overpays for anything and Fortune Brands is going to use that lucrative ball franchise as a carrot to orhestrate the deal, if in fact there is one.

Someone will eventually overpay because that's the way it works, egos get in the way and emotions take over. As the aforementioned Mr. Buffett is fond of saying: Emotions are the enemy of good investing.

[Erik]

Yup, Buffet is not in the habit of over-paying for sure. But he is very keen on value.

That's why I think it more likely to see a management buyout funded by a private equity firm. I really can't see one of the other big golf names getting a kick at the cat.

Cheers,
Erik

[JPB]

Erik-

I totally agree. Some private equity firm will step up to the plate and overpay. Once it happens, look out because Titleist and Foot-Joy will never be the same.

[Tighthead]

Titleist has been great for lefties. I'm hoping for status quo for that very reason.

[Ky Laffoon's Ghost]

Looks like when my 695MBs wear out I'll have to drive up the road to get fitted at Scratch Golf...Wally can be a total pill, but screwing with the acknowledged leader in any particular business for simple minded financial reasons is never a good thing. Never.

[digsouth]

Del,

Money drive the legislature.

They have let all the 'monopoly' like rules slide, while distracting the lemmings with gay rights, DADT, fake war needs, and other non issues. Slight of hand.

thru dem and gop while the 'impeachment' joke went down againt slick willie, the enegy companies and banks were hooking up: the Gramm rules made the banks into gambling houses, and I don't see the golf manufacturing industry being in any danger of real consumer protection

Hope I'm wrong.

[Ky Laffoon's Ghost]

You know, dig, golf just doesn't register when compared to energy, banking (commercial and investment), insurance, and commodities/derivatives trading, even back when these things were performing their proper roles in the political economy...but I do like your take on recent politics. It's Texas,isn't it?

[Kevin]

Private equity hates the golf business. See KKR and Spalding. Some small firm (Parkside Group) and MacGregor.

Too small a deal for Berkshire.

Bridgestone maybe? I assume Mizuno is too small.

Yes, it all points toward Beaverton Oregon.

[Del the Funk]

digsouth, I had a similar thought that possibly golf would not be on the radar screen because there's no political angle. But the DOJ website does have some interesting data on deals that were challenged and subsequently altered or abandoned.

I'll be surprised if Ackman is able to effect any real change even in the medium-term, if ever.

[thusgone]

@del: that's a great point about lack of political cost making govt antitrust oversight more likely.

@dig, the ftc and doj antitrust division have been very active under obama, as opposed to the preceding 8 years. the reason you haven't been reading about a lot of merger reviews is because, aside from the major airlines (which have a pretty valid failing firm/failing industry argument) there haven't been many big mergers proposed post-crash.

if the players can keep the ball in the air until a republican is sitting in the oval office, they will likely have a much easier time with the regulators.

[nick]

Still play a set of hogan apex blades and will never switch. Cant get much better IMO