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Monday, November 22, 2010

Titleist Going Solo?

Rumors run amok that pressure from certain key investors in Fortune Brands is going to force the NYSE quoted company to split their business into several parts. Fortune owns many great brands like housewares maker, Moen, liquor brands like Jim Beam and also the number one golf revenue generator, Acushnet. The brands within Acushnet are Titleist, Pinnacle, Scotty Cameron, Vokey Wedges and Footjoy shoes.

As an investor I'm all for unlocking value in a share price. The question is ...Who will buy Acushnet?

The suitors would naturally include industry giants, Callaway, Nike and TMAG. Let's have a brief look at these and see if there is a fit.

Firstly Callaway. I don't see this one. As much as Callaway would like to buy their nemesis, their market capitalization of $450M isn't going to support an acquisition of Titleist's reported $1B plus sales.

Nike and Titleist together. In England, we like to say "like chalk and cheese". In America you say "oil and water".  It means the same thing! The culture clash would keep HR busy for an eternity. Not going to happen.

TMaG (TaylorMade adidasGolf) is another potential candidate who would be anxious to get their hands on Titleist's hugely profitable golf ball business. They certainly have the money as the German giant, adidas generates revenues that the golf business can only dream about. As well as facing US monopoly issues, rather like Nike I just don't see the cultural fit.

The natural suitor comes from the East - Japan, Chaina, Taiwan, Korea. They have the money, especially with the exchange rate the way it is and they like "blue chip" brands like Acushnet. The company throws off a good amount of cash and it would be a great story for a Far Eastern company to own this prestigious US brand.

It's all conjecture at this time but good fun to speculate. Titleist and Footjoy under the Acushnet banner remain one of the great legacy brands of the game of golf and a company with deep(ish) pockets will pay for the privilege of adding it to their assets.

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