Golf's Allure Amid South African Gloom Draws Old Mutual Deal

  • Unit bets luxury consumers less hurt by economic slump
  • Plans to roll out mega-store concept for cycling outlets

Old Mutual Plc’s private-equity unit bought a majority stake in MoreCorp, the largest South African golf-equipment retailer, as the investor bets demand from an expanding upper-middle class will overcome slowing economic growth.

The asset manager paid more than 300 million rand ($20.9 million) for a 70 percent stake in the company that controls more than 40 percent of the country’s golf market with The Pro Shop, World of Golf, and Playmoregolf outlets. There may be 150,000 golf-club members in South Africa, the company said, while South African players Branden Grace and Louis Oosthuizen are both ranked in the world’s top 20.

“Some people’s first instinct would be that golf is a dying game -- we don’t believe that at all,” Jacci Myburgh, Old Mutual’s head of private equity, said Tuesday by phone from Cape Town. “We see a lot of consumers transitioning into the upper-income lifestyle market over time who can take up golf.’’

South Africa, the continent’s most developed economy, narrowly avoided recession in the third quarter, posting 0.7 percent annualized growth. Old Mutual bought out Rhys Hughes, who co-founded MoreCorp in 1976, because high-end consumer businesses are less tarnished by the nation’s slow growth, Myburgh said. The investor plans to make a similar investment within a month to reach the halfway mark in spending from its 4 billion rand Fund IV, he said.

‘Interesting Place’

Old Mutual’s move on MoreCorp is counter to a global trend of declining golf-equipment sales as weekend players age and younger people don’t take up the sport due to cost and time pressures. Adidas AG said in August it hired Guggenheim Partners LLC to look at options for its flagging TaylorMade golf business as the German sportswear maker considers exiting a market that it once led.

“The number of registered golfers in the U.S. has declined over the past 5-7 years, while in Asia it’s exploded,” Myburgh said. “South Africa is in the middle, with some developed, and some developing, market characteristics, so it’s an interesting place.”

MoreCorp also owns Cycle Lab, the nation’s largest cycling retailer, according to the investor. Co-founder Darryl Egdes retains 20 percent and management owns 10 percent, the Old Mutual team said.

MoreCorp will expand Cycle Lab by using the same large-store format used in its golf business, Investment Principal Farhad Khan said. Two new 2,500-square-meter (27,000 square-foot) stores will open this week in Pretoria and Johannesburg, with Cape Town and Durban outlets to follow within two years, he said.

Old Mutual unit Nedbank Group Ltd. is a sponsor of the Nedbank Golf Challenge, a tournament with $6.5 million in prize money that starts Thursday at Sun City, northwest of Johannesburg.

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