* Blackstone, Callaway teaming up on bid -- sources
* Golf unit deal could be up to $1 billion -- source
By Denny Thomas and Megan Davies
HONG KONG/NEW YORK, April 28 Blackstone Group
LP (BX.N) is teaming up with Callaway Golf Co (ELY.N) for a
possible bid for Fortune Brands Inc's FO.N golf business, two
sources familiar with the matter said.
A deal could be worth up to $1 billion, one of those
sources said. Final bids for the auction, which has attracted
interest from Asian bidders, are due on May 9, that source
The company announced plans late last year to sell or spin
off its golf business, which makes Titleist golf equipment, and
spin off its home products business, which makes Simonton
windows and Moen faucets, amid pressure from activist investor
William Ackman. [ID:nN07107821].
"If you look at the size of their (Callaway's) balance sheet, market cap and their cash flows, they would need a
partner," the source said.
Like any other auctions, joint partners may or may not
decide to proceed with final bids.
The golf unit, which also makes FootJoy shoes and gloves,
had revenue of $1.24 billion and operating income of about
$80.2 million last year. It had about $100 million in cash flow
last year, which could give it a valuation of about $800
million to $1 billion, sources have said.
"The business has had some lean years and I would (say) a
multiple of about 10 times is where this deal should settle,"
the source added.
Earlier this year, the company hired Morgan Stanley (MS.N)
for advice as it explores options for the golf unit. Aside from
strategic players, which could include Nike Inc (NKE.N) or
Adidas AG (ADSGn.DE) and private equity firms.
Fortune may decide in the end to spin off the golf business
-- instead of selling it outright -- unless the bid prices come
in significantly higher than they did in the first round, said
a third source familiar with the situation.
A decision is still uncertain as Fortune waits for the next
round's bids, that source said.
Blackstone and Callaway declined comment.
Fortune Brands spokesman Clarkson Hine said: "As we've said
before, we are exploring the sale or spin-off of our
industry-leading Acushnet golf business. Acushnet is a valuable
company that can create significant value for shareholders
through a sale or as an independent company. Beyond that, we
don't intend to discuss the process."
(Reporting by Denny Thomas and Megan Davies; additional
reporting by Jessica Hall in Philadelphia, Martinne Geller in
New York and Viraj Nair in Bangalore; editing by Andre Grenon)