S. Korea’s Centroid likely invite strategic partners after $1.7 bn buyout of TaylorMade

Centroid Investment Partners, a Seoul-based private equity firm, will likely draw platform operators hungry for high-profile name on their e-commerce profile, onboard to leverage on its $1.7 billion acquisition of TaylorMade Golf Co., a California-based golf equipment maker and sponsor of top players like Tiger Woods.

According to multiple sources from the investment bank industry on Tuesday, Centroid has recently signed a $1.7 billion full stake deal with KPS Capital Partners, an American private equity firm and the largest shareholder of TaylorMade.

Under the deal, Centroid will be taking over all of TaylorMade’s global branches including the U.S. headquarters and Korean business. Shares will be endorsed before the end of July after balance payment.

Centroid beat out other shortlisted candidates from the U.S., Europe, and China in a deal arranged by Morgan Stanley.

The PEF is expected to court strategic partners for a long-term return from the costly deal.

Centroid will likely benchmark the M&A deal of Mirae Asset Global Investments in 2011 when it forged ties with Fila Korea to buy Acushnet, world’s largest manufacturer of golf equipment that owns Titleist golf club and balls.

Mirae Asset Global Investments and Fila Korea invested each $625 million and $100 million and received $500 million financing from Korea Development Bank to acquire Acushnet for $1.2 billion. Fila Korea’s initial share in Acushnet was only 12.5 percent but it later expanded ownership to become the largest shareholder with 52 percent. Fila Korea listed the company on the New York Stock Exchange in 2016.

After the initial public offering, Mirae Asset recouped more than double its investment in five years. Through aggressive management, Acushnet emerged as a company with 4 trillion won ($3.6 billion) market cap under Fila Korea, whose equity gain is valued at over 1 trillion won.

Taylor Made, whose earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $113 million last year, is projected to raise $150 million in profit this year.

The timing cannot better as the Covid-19 pandemic has created a boom in golf industry with more people enjoying the outdoor sport.

According to U.S. golf industry research agency Golf Datatech, retail sales of golf equipment in the U.S. reached $2.8 billion last year, up 10.1 percent from 2019. Grand View Research also projected world’s golf club market to expand 2.5 percent every year from $3.7 billion last year to $4.45 billion in 2027.

Overall golf equipment market is estimated to have grown from $10.9 billion in 2017 to $11.8 billion last year.

TaylorMade is projected to stand out in the bourgeoning industry on the back of its sponsor for major golf players including Tiger Woods, Dustin Johnson, and Rory McIlroy.

The bulk of TaylorMade sales come from golf clubs and there would be opportunity in golf balls and fashion sectors.

A number of candidates could take up strategic partnership. Online retailers SSG.com and Lotte as well as materials players Nexen, Hankook Tire & Technology, and fashion brands Hanse, Youngone Corporation, and F&F eager to dive into golf apparel business are some of them.

Shinsegae, importer of golf apparel brand J. Lindeberg, also may wish to seek to create synergy, while Lotte and Hyundai Department Store would jump on the chance to own golf equipment brand.

Kakao could also be interested as it has been expanding screen golf-related service through Kakao VX and Nexen is engaged in golf ball and equipment business with its own Saint Nine brand.

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