[John Blain]

TM, Adams and Ashworth were sold today to KPS Capital partners for $425 million....
I know the industry is in the tank but on the surface that seems awfully cheap.


-John

[Steve Lapper]

TM, Adams and Ashworth were sold today to KPS Capital partners for $425 million....
I know the industry is in the tank but on the surface that seems awfully cheap.


-John

Especially compared to Acushnet Holdings (Titleist) which is now publicly-traded at a market-cap of $1.5B......I'll take KPS's buy of TM all day and short GOLF(Achushnet) stock accordingly. With the difference, I'd buy Bulle Rock and make it my own private course...Hah!

[MClutterbuck]

Taylor Made assets should be much better served owned by private capital than as a division of a public company. And customers should be better off as well.


At $425 million this could be a smart buy, only $225 million of equity or so must be in the deal. Will be interesting to follow.



 

[BCrosby]

JP -


What sort of multiple did the buyers pay?


Bob

[John Kavanaugh]

JP -


What sort of multiple did the buyers pay?


Bob

5x

[MClutterbuck]

John, do you have a link with multiple information? Is this pro-forma for the stand alone company?

[John Kavanaugh]

John, do you have a link with multiple information? Is this pro-forma for the stand alone company?

No, it's an inside joke. The guys over at Bombsquad are rolling in the aisles. Sorry.

[Howard Riefs]

http://www.adidas-group.com/en/media/news-archive/press-releases/2017/adidas-sell-taylormade-adams-golf-and-ashworth-kps-capital-partn/

https://www.wsj.com/articles/adidas-sells-taylormade-and-other-golf-brands-to-kps-for-425-million-1494442916

http://www.golf.com/equipment/2017/05/10/taylormade-golf-sold-425-million-kps-capital-partners-lp

http://www.golfdigest.com/story/adidas-sells-taylormade-for-dollar425-million

http://golfweek.com/2017/05/10/adidas-sells-taylormade-golf-for-425-million-to-kps-capital-partners/

[Mike_Young]

Agree it would be much better in private hands.  Seems each time DD begins the prospective buyer finds a major problem with the valuation of the value of the out of date inventory taken back as new is replaced in both green grass and off course stores.  Supposedly a few months ago there were almost 2 quarters worth of production still out there somewhere looking to be sold but out of date...it will be interesting to see how they dispose of all that material...

[Ian Mackenzie]

I dont think you can really determine KPS' buy-in multiple with info from the web.
Doubt that either party wants that out there. May learn more when the deal closes later this year.


KPS does not have much experience in consumer sports.
Private equity shops that buy businesses like this will be seeking to "trade" or "flip" it to a new financial or strategic buyer within a 4-7 year window after imparting their "secret sauce" on it.


(Operational efficiencies, working capital methods, etc.)


They usually model acquisitions for a 20-25% net IRR or close to 3x multiple on invested capital.
For KPS, and their institutional investors, to be happy, they will need to sell this biz to a larger player or have an IPO. Maybe it's the beginning of a roll-up that is to go public. Buy distressed assets, integrate them....who knows.

PE guys that I know want nothing to do with golf businesses.

[Tim Gavrich]

With so many big-name pros on the payroll, TaylorMade's burn rate, at least on marketing, has to be pretty darn big. Any chance Tiger and Rory are involved as silent partners with KPS? I have no inside information to indicate this, FWIW - just wondering if those who know about these things think it might be a possibility.

[BCrosby]

TaylorMade and other OEMs should be begging the USGA to roll-back the ball. It will give them - at long last - something new to market.


Bob

[Josh Tarble]

With so many big-name pros on the payroll, TaylorMade's burn rate, at least on marketing, has to be pretty darn big. Any chance Tiger and Rory are involved as silent partners with KPS? I have no inside information to indicate this, FWIW - just wondering if those who know about these things think it might be a possibility.

I don't know if it would have been in KPS but I have to assume Rory's deal was negotiated by them and bet it includes some sort of equity in TM. 

[Carl Johnson]

Similar recent acquisition of a sports equipment company (hockey, baseball, softball, lacrosse) by private equity. http://www.prnewswire.com/news-releases/sagard-capital-announces-that-performance-sports-group-receives-court-approval-of-sale-of-substantially-all-of-its-assets-to-investor-group-led-by-sagard-and-fairfax-financial-612975623.html

[Eric LeFante]

Only half of the $425 million is cash and the other half is a combination of secured notes and contingent considerations. As Steve pointed out,  its competitors have market caps of $1.5 billion (Titleist) and $1.2 billion (Callaway) and Adidas only got $215 million cash upfront. Titleist has $1.6 billion in revenue and Callaway has $900 million in revenue. Taylormade's revenue was $1.7 billion in 2012 and I believe that is down to about $1 billion now.


It's interesting to see how most of the Nike tour pros have switched to Taylormade. I don't use Taylormade woods and I think the only way I can explain that is stupidity. I think it's quite clear the best players think Taylormade has the best woods.

[JESII]

The players are making business decisions 9 times out of 10. Nike/TM/Callaway/Titleist have budgets for Tour Sponsorships...whichever one has the room and interest to pay you the most is the one you go to. Period.

[Greg Tallman]

The players are making business decisions 9 times out of 10. Nike/TM/Callaway/Titleist have budgets for Tour Sponsorships...whichever one has the room and interest to pay you the most is the one you go to. Period.

Oh Jim, Jim, Jim. For Rory it was about the ball performance in the wind... the $100M was just a small perk. 

It appears the new owners are content with the current leadership. Interesting considering that multiple suitors had former leadership lined up or even as a prerequisite to doing the deal. It will be interesting to see what chanegs occur. My guys say lots of changes already happening but not much sure what these might be as Adidas had already gutted the organization over the last 3-5 years. 

[David_Tepper]

For what it is worth, Callaway shares made a 5-year high in price earlier this week, up roughly 135% in that time frame.

[Greg McMullin]

Eric, it's also possible TM's player sponsorship spend drives the number of players using their equipment. It would be interesting to compare what TM spends on player sponsorships versus say Titlest and Callaway.

Only half of the $425 million is cash and the other half is a combination of secured notes and contingent considerations. As Steve pointed out,  its competitors have market caps of $1.5 billion (Titleist) and $1.2 billion (Callaway) and Adidas only got $215 million cash upfront. Titleist has $1.6 billion in revenue and Callaway has $900 million in revenue. Taylormade's revenue was $1.7 billion in 2012 and I believe that is down to about $500 million now.


It's interesting to see how most of the Nike tour pros have switched to Taylormade. I don't use Taylormade woods and I think the only way I can explain that is stupidity. I think it's quite clear the best players think Taylormade has the best woods.

[Eric_Terhorst]

Bob Crosby,

Adidas reported EUR892 MM in Revenue for Taylor Made Golf in 2016.  Call it about $US1 billion.

Assuming an 8% EBITDA margin, the Taylor Made multiples are:
EV/Revenue ~ 0.43x  EV/EBITDA ~ 5.4x, or about right for a PE deal.

By comparison to three publicly traded companies:
Acushnet (NYSE:GOLF):  1.2x, 10.0x    $1.6B Rev       ~12% EBITDA margin
Callaway  (NYSE:ELY):    1.4x, 20.3x    $900 MM Rev  ~7% EBITDA margin
Dunlop (TSE:7825):        0.6x,   7.7x    $640 MM Rev  ~7% EBITDA margin

Dunlop (Srixon), a subsidiary of Sumitomo Rubber with only 35% of shares floated, appears to be the best comp. 

Mr. Tepper may have identified a good short....

[BCrosby]

Thanks.


I'm with you. I don't get the Callaway run-up relative to its peers.


Bob

[Mike_Young]

I don't claim to know all of the numbers affiliated with playing the market.  To me it's all paper and eventually it all comes down to real dollars.  For that reason I think we will see a different Titleist.  They will be forced to show growth in a market that is not growing.  Before TMAG had to show growth they were a much better run company.  Golf stocks are sucker stocks.  Think how many logical business people will invest in golf stocks just because they are golf.  No other reason.  That's why Titleist will go for a while.  Remember when Callaway went public.  you couldn't find the stock.  Getting 100 shares from a broker was tough for god clients.  Anyway, golf is a product that needs to be based on quality and not growth and I'm afraid that may hurt Titleist.  Their main ball PV1 cost around 38 dollars wholesale and it's difficult to sellthem for much more than 49 bucks.  They have 70% of the US ball market. 
The guy to watch for is Srixon ( short for something like SUMITOMO RUBBER INDUSTRIES FOREVER)  The new president is sharp and has his sites set high.  They presently have the most patents of any compnay on the golf ball and have been producing for other brands for a while.  Their new balls are very good and their new driver just outperformed Epic and M@,M! on Mygolfspy.com.  Also the irons are as good as Mizuno and they are winning on tour.  They have a large share of the European and Pacific markets and their new QStar Tour ball is every bit as good as the Chromesoftx etc.  Plus you can make money on their product. 

Anyway....that's a redneck eval of the TMAG deal....tough road to hoe...

[A.G._Crockett]

I won't pretend to know much about the business side of this, but I will be very interested to see what this means for TM going forward in the equipment market.  I think most of us realized years ago that what TM was doing with new product intros so often wasn't sustainable; painting drivers white, then with stripes, then back to black isn't a long-term strategy for products that cost big dollars.

I don't think it is luck that Callaway has made progress; I read an article several years ago about their then-new CEO, who junked the stuff that was in the pipeline when he came on board and has put Callaway on a product cycle more like Titleist and Ping than what Callaway and TM were doing at that time. 

By contrast, a couple of weeks ago TM announced a program where golfers could, in effect, lease TM clubs so that they could get the newest stuff immediately and just keep paying their monthly fee, much like a cell phone purchase plan model.  It struck me as desperation when I read it, and still does.

[BCrosby]

AG -


I did not know that about Callaway's changes. They were smart. OEM's need to plan on less frequent inventory turns. That sounds easy on paper, but I'd guess it is wrenching for most of them given the way they finance their working capital.


Bob

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