Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

The maker of Titleist golf balls is teeing up an IPO.   

Acushnet, the company behind the best-selling balls and other golf gear, filed to go public Monday. The timing is good: Callaway Golf, its smaller rival and closest comp in the public market, is trading near an eight-year high. And because of your bad golf shots, Acushnet may well command a premium valuation to Callaway.

Acushnet owns Vokey Design wedges and Scotty Cameron putters, but is less exposed to sales of golf clubs, which are subject to changes in technology and thus purchased less frequently than low-ticket items like golf balls and gloves. (If this 2010 blog post from the New York Times is to be believed, some 300 million golf balls are lost each year in the U.S. alone). 

"Consumable" products -- driven by the number of rounds played -- made up 43 percent of Acushnet's $1.5 billion in net sales in 2015. That makes the company better able to weather any economic downturn that puts a damper on discretionary spending. 

Bread and Putter
Acushnet's sales are less vulnerable to hits and misses given its decreased dependence on clubs
Source: Company filings
*Acushnet split based on three months ended March 31, 2016; Callaway's based on year ended Dec 31, 2015

Although Callaway said in an April earnings call that its golf-ball business "continues to build momentum,'' Acushnet is doing what it can to maintain its lead over rivals, which also include Bridgestone, Dunlop and Srixon. The company's IPO filing reveals its has the largest patent portfolio in the industry, with almost 1,200 active patents specifically dedicated to balls (with an additional 584 across clubs, shoes and gloves). 

Going Global
Both Callaway Golf and Acushnet have a geographically diverse sales mix

Acushnet's attention to emerging economies, including Southeast Asia, may help drive future growth. The same goes for its newly-launched online Footjoy retail presence, an online store for Titleist golf gear (slated for 2017) and the expansion of its Footjoy women's apparel line. The latter is a smart move, considering that more women are getting into the game -- they made up 24 percent of U.S. golfers in 2015, an increase from 20 percent in 2011. 

In a Good Groove
Acushnet's earnings before interest, taxes, depreciation and amortization have grown at a compounded annual rate of 12 percent over the past five years
Source: Company filings
*Groove: a description of a swing that consistently follows the same path, time after time.

Even without factoring in potential share price gains after the company goes public, Acushnet's owners Fila Korea and investors let by Mirae Assets Global Investments stand to make a tidy profit. They bought the company for $1.23 billion from Fortune Brands (now known as Beam Suntory) in 2011 and the company may now be worth double that, based on an industry average of roughly 11 times its 2015 Ebitda of $215 million. A successful IPO may also buoy the sale prospects of TaylorMade and the rest of Adidas' golf unit by drawing in suitors hoping to replicate a similar public exit in the future. 

Investors will have their final say when it comes time to price Acushnet's IPO, but for existing owners, there's a good chance it'll find the fairway. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net