Fila Korea buys Titleist golf company for $1.2 billion

HONG KONG/NEW YORK Fri May 20, 2011 6:04pm EDT

A variety of products by Fortune Brands are seen in Denver, Colorado January 26, 2007. Left to right are Pinnacle golf balls, Titleist golf balls, Knob Creek bourbon, Markers Mark bourbon, Masterlocks locks and Moen faucets (catalog.)Fortune Brands agreed to sell its golf equipment business for $1.23 billion, to a group led by South Korean sports apparel and footwear maker Fila Korea Ltd, as part of Fortune's goal to become a pure-play alcoholic drinks company. REUTERS/Rick Wilking

A variety of products by Fortune Brands are seen in Denver, Colorado January 26, 2007. Left to right are Pinnacle golf balls, Titleist golf balls, Knob Creek bourbon, Markers Mark bourbon, Masterlocks locks and Moen faucets (catalog.)Fortune Brands agreed to sell its golf equipment business for $1.23 billion, to a group led by South Korean sports apparel and footwear maker Fila Korea Ltd, as part of Fortune's goal to become a pure-play alcoholic drinks company.

Credit: Reuters/Rick Wilking

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HONG KONG/NEW YORK (Reuters) - Titleist, one of world's best-known golf equipment names, is getting a new owner after alcoholic drinks maker Fortune Brands Inc struck a deal to sell the brand to Fila Korea Ltd for $1.23 billion.

Fortune FO.N now will spend more time in the clubhouse than on the fairway. The maker of Jim Beam bourbon will focus on liquor after dropping its Acushnet subsidiary that makes Titleist golf balls, clubs and other equipment.

Fila Korea owns the Fila brand name, recognizable by many sports aficionados for its flowing, streamlined logo. It bought the brand in 2007 from Sports Brands International, a unit of hedge fund Cerberus Capital Management LP CBS.UL management.

The deal gave Fila Korea (081660.KS), which beat out private equity firm Blackstone Group LP (BX.N) and others, the rights to the worldwide use of footwear and clothing brands. Fila was established in Italy in 1911.

Buying Acushnet -- based in Fairhaven, Massachusetts and named for the Massachusetts town where it was founded in 1932 -- makes sense for Fila and its partners, which include Mirae Asset Private Equity, National Pension Service of Korea and Korea Development Bank, experts said.

That is because its line of athletic clothes and shoes fits in better with golf equipment than Courvoisier cognac or Maker's Mark bourbon, they added.

"This is one of those corporate separations that is good for both companies because it puts Titleist under the ownership of a more sports-oriented company," said Craig Johnson, president of retail consulting firm Customer Growth Partners.

"Fortune can focus more on their true long suit, which is the adult beverages area," said Johnson, who was reached by phone while in the golf section of a Wal-Mart near New Haven, Connecticut.

Fortune was under some pressure to change its business last year because of investor William Ackman. At the time, it said it would sell Acushnet, which also makes FootJoy gloves and shoes, and spin off its home products business, which makes Moen faucets.

Nearly half of the golf unit's 2010 sales of $1.24 billion came from markets outside the United States. The unit had an operating income of about $80.2 million last year.

"We think the valuation of the business is fair," said Jefferies analyst Douglas Lane, who added that the purchase price implies a valuation of 1 times its estimated 2011 sales and just below 10.5 times 2011 estimated EBITDA, or earnings before interest, taxes, depreciation and amortization.

Fortune expects net proceeds of about $1.1 billion from the sale.

Those statistics of course appeal mostly to investors as well as the banks that worked on the deal, which included Morgan Stanley (MS.N) and Centerview Partners for Fortune and Nomura Holdings Inc (8604.T) and KDB for Fila.

Selling Acushnet and the Titleist brand will have few implications for people who buy Titleist equipment, according to retail experts.

"These ... kinds of things certainly are interesting to investors and so forth, but the guy that has to walk into the sporting goods place and pick out a box of golf balls for himself, he's not thinking about who's managing the company," said Robert Passikoff, president of consultancy Brand Keys Inc. "He's thinking about if he can cut three strokes off his game."

Fortune's shares closed down 1.6 percent at $63.88 on the New York Stock Exchange on Friday.

(Additional reporting by Stephen Aldred in Hong Kong, and Mihir Dalal and Nivedita Bhattacharjee in Bangalore. Editing by Dan Lalor, Sriraj Kalluvila)

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