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Fortune Brands to sell Titleist and FootJoy to Fila Korea

Titleist
Angus Murray

Last December, Bruce Carbonari, chairman and chief executive officer of Fortune Brands, announced that the $7 billion company would separate its three businesses in 2011 to "maximize long-term value for our shareholders and to create exciting opportunities within our businesses." The plan was to keep one unit, Beam Global Spirits & Wine (2010 revenue of $2.5 billion, flagship brand Jim Beam bourbon), and sell off the other two units: Home & Security ($3 billion in sales, flagship brand Moen faucets); and the Acushnet Company ($1.2 billion in sales, flagship brand Titleist golf balls).

Fortune Brands' decision to downsize (it acquired the Acushnet Company in 1976) created a rare occurrence in the golf biz: The opportunity to buy two iconic brands, Titleist and FootJoy.

The dominos have started to fall. Fortune Brands announced Friday that it signed a definite agreement to sell the Acushnet Company to a group led by Fila Korea Ltd. and Mirae Asset Private Equity for a reported $1.225 billion in cash. The sale is expected to close this summer.

THE DEAL
At first glance, this merger appears to be a win-win for both sides. Fila Korea, a $550 million company, gets a venerable $1.2 billion brand to make its entrée into the emerging Asian equipment market. The Acushnet Company, which will operate as a standalone entity (worldwide headquarters to remain in Fairhaven, Mass.), joins forces with a firm possessing a much stronger foothold in Asia. Growing its business globally is critical given the mature U.S. market. Case in point: The National Golf Foundation reports that golf ball units sold in the U.S. are down 30 percent in the past 10 years, and sales in dollars are down 16 percent. (The market is rebounding in 2011 after a couple of very lean years.)

THE ASSETS
Fila Korea Ltd. et al get several significant assets for $1.2 billion. They include (in no particular order): A respected, experienced executive team led, since 1989, by Wally Uihlein (Peter, his son, won the 2010 U.S. Amateur Championship); a proven sales force; an effective sales distribution chain in the largest (U.S.) golf market in the world; a growing brand in key international locales such as Europe, Japan, China, Canada and Korea (47 percent of the Acushnet Company's 2010 sales were outside the U.S.); two state-of-the-art testing facilities (TPI and Manchester Lane) in Oceanside, Calif., and Fairhaven, Mass., respectively; contracted Tour pros called "Titleist brand ambassadors," including Koreans Kyung-Tae Kim (35th in the latest world ranking) and Seung-Yul Noh (84th); "Titleist golf ball ambassadors" including Korean K.J. Choi (34th; won last week's Players Championship); domestic golf ball manufacturing facilities; strong wood/iron lineups with technologically-advanced designs; a multi-tiered, dedicated approach to custom fitting; industry-leading putters, wedges, shoes and gloves; and a rich stable of golf ball patents (more than 700).

Gene Yoon, Chairman and CEO of Fila Korea, says, "We are excited to embrace Acushnet's exceptional management team led by Wally Uihlein. With our extensive knowledge and reach in Asia, we believe that the Acushnet brands have incredible new opportunities for growth in the emerging markets in Asia."

THE GOLF BALL
Perhaps the most high profile asset is Acushnet's ball franchise. Through March, Titleist and Pinnacle balls accounted for more than 40 percent of the balls sold in the American market (greater than the next three leading brands combined). Titleist's Pro V1, in fact, is the most successful ball of all time, selling more than 900 million balls in the past decade.

Despite stronger competition than ever, Titleist's ball business remains on very solid footing. The Sports & Leisure Research Group (S&LRG) conducted an exclusive research study (focusing on consumer buying habits) for the Sports Illustrated Golf Group last year. Titleist dominated the golf ball conversation among the 1,600 golfers surveyed, and its brand loyalty is stronger than any club brand. According to Jon Last, President of S&LRG, "The finding remains consistent with some of the attitudinal research we conducted in January 2011 with over 1,000 golfers."

YOU, THE CONSUMER
Sales of golf's mega-brands can mean significant changes for the companies involved as well as the buying public. According to a source close to the proceedings, the impending sale should have little to no effect on golfers here in the U.S. It's likely to be "business as usual" with critical barometers such as product development, product offerings, availability and pricing largely unaffected in the short term. That is good news for Pro V1 lovers who just want to know they can get their favorite ball in time for this weekend's tee time.

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