Fortune Brands is teeing up the sale of its golf unit, home to brands like Titleist and Footjoy. Morgan Stanley is leading the sale and has been sending out marketing materials and non-disclosure agreements to potential bidders during the past week.
Getty Images
This is the follow-through for a plan announced in December, when the company caved to pressure from activist investor William A. Ackman to split its golf, liquor and home and security units.
Nike and Adidas are reported would-be buyers of the golf unit. But the list will circle the globe to include Germany’s Herz family-owned Maryland GmbH, golf specialist Callaway—perhaps alongside a private equity firm, and one Chinese sporting-goods company, sources familiar with the process said. Japanese conglomerates Sumitomo Rubber Industries and Mizuno may also join in the bidding, says a banker briefed on the process.
First-round bids should come in around the end of February. But if the price isn’t right, the company will IPO the unit instead, says a source close to the deal.
Fortune Brands said the unit earned $115 million in pre-tax earnings for the first nine months of 2010, an 85 percent increase from the same period a year earlier. Bankers have suggested the business could fetch nine times trailing operating earnings, or around $1.3 billion, in an outright sale. The company expects to complete either strategy by mid-year.
An IPO of the home and security unit—with brands like Moen faucets and MasterLock—is still on the books. Ackman was the architect of this plan. He believes this arm will see significant upside in the public market as rising home starts boost demand for products like padlocks and faucets.
Ackman has yet to seek a board seat for the new entity, but his nearly 11 percent stake gives him some say in Fortune’s strategy. For this reason, inquiries from private equity firms are taking a backseat to the public offering, slated for late 2011.
Left as the standalone, then, is Fortune’s spirits business, with Jim Beam whiskey as its anchor. The unit constitutes three-quarters of the company’s revenue and could eventually be a takeover target for a company like Diageo.
In the meantime, Fortune Brands will report earnings this Friday.