This article was published on Feb. 10, 2025, at 10:02 a.m. on the ChosunBiz MoneyMove site.
As the global golf brand TaylorMade has come up for sale for the first time in four years, the fashion company F&F, which has invested in the management rights acquisition fund, has taken the 'flower viewing party.' If someone appears wanting to buy TaylorMade for 5 trillion won, F&F could also earn an investment profit of 1.5 trillion won. On the other hand, if no buyers emerge, they might negotiate with the selling entity, Centroid Investment Partners (hereinafter Centroid), to pursue a management rights acquisition.
However, the current corporate value of TaylorMade that F&F is considering is known to be about 3 trillion won, which falls short of Centroid's expectations. They believe that a valuation of 10 to 12 times the earnings before interest, taxes, depreciation, and amortization (EBITDA) would be appropriate. The market is watching whether both sides can close the gap in their valuation expectations.
According to the investment banking (IB) industry on the 10th, Centroid has recently decided to sell the management rights of TaylorMade and has begun contacting potential buyers. They have already expressed willingness to sell since last year if good buyers appeared, and this year they have selected a sales agent and have begun to proceed with the sale.
Earlier, Centroid acquired TaylorMade in 2021 for a corporate value of about 2.1 trillion won. They secured 1 trillion won through senior acquisition financing, and secured 463.3 billion won from the project fund 'Centroid No. 7-1' for mezzanine financing, as well as 605.9 billion won from another fund 'Centroid No. 7' for subordinate equity investment.
At that time, F&F, which participated as a strategic investor, invested 200 billion won in mezzanine financing and 300 billion won in subordinate equity investment. This means they provided half of the acquisition price of about 1 trillion won, which excludes liabilities.
F&F has a right of first refusal regarding the management rights of TaylorMade. If a third party offers to buy the company, it means they have the right to first acquire the management rights under the same conditions within 14 days. For instance, if an external party values TaylorMade at 5 trillion won and submits a purchase offer, F&F must arrange 5 trillion won within two weeks to gain management rights. F&F not only has the right of first refusal but also a right to consent regarding the sale, stating that they can oppose the sale to specific third parties even if they do not exercise their right of first refusal, indicating a potential for future legal disputes.
Kim Chang-soo, chairman of F&F, is known to have a strong desire to acquire TaylorMade. Just as the domestic fashion company Fila Korea became the owner of Acushnet, which holds 'Titleist,' F&F aims to acquire TaylorMade for long-term operation. TaylorMade, Titleist, and Callaway are often referred to as the three major golf brands in the world.
Centroid seeks a corporate value of around 5 trillion won for TaylorMade, but the price considered by F&F is reported to be significantly lower. Last year, TaylorMade's EBITDA was $222 million (about 320 billion won), and TaylorMade assessed its corporate value by applying a multiple of 15 times this amount and adding a management premium.
On the other hand, F&F is reported to believe that applying a multiple of 10 to 12 times the EBITDA is appropriate. They state that even with the management premium added, the corporate value should be in the range of the upper 2 trillion won to 3 trillion won.
The market is watching to see if a 'big player' will emerge who recognizes TaylorMade's value at 5 trillion won. An industry insider from the IB sector noted, “Although the growth of the golf market is stagnant, if strategic investors from the Middle East or China acquire TaylorMade, they could use their substantial capital to potentially grow the whole market.”
If a capital-rich strategic investor appears and buys TaylorMade for 5 trillion won, F&F may choose to exit (recover their investment) without the need to compete. If the sale price is 5 trillion won, excluding acquisition financing (principal and interest), the equity value alone would quadruple to the principal amount. For F&F, having invested 500 billion won could result in a total of 2 trillion won, potentially yielding an investment profit of 1.5 trillion won.