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Home TO BE OR NOT TO BE, THAT IS THE QUESTION:

CNBC reported that Acushnet, owner of Titleist and FootJoy brands, is working towards an initial public offering. While it may be news to CNBC and in turn its viewers, the company’s owners, Fila, have been on the record confirming this always was its prov1original plan. "We've planned an initial public offering (IPO) since we acquired Acushnet in 2011. We will push forward with the plan," a FILA spokeswoman told the Korean Times in April. "Our goal is listing the company on the New York Stock Exchange next year. But things can change depending on market situation."

As long time readers of the Daily Pulse and Web Street Golf Report may recall, in 2011 a Korean Consortium consisting of Fila and Mirae Asset acquired the company. Fila's investment was seen to be long term (a strategic investment) while Mirae Asset (investing on behalf of the Korean Pension Service Fund) was seen to be more of the traditional five-year invest and redeem. The fifth anniversary of the acquisition is in July 2016. Therefore, it only makes sense that the company would be exploring recapitalization options as it faces a potential redemption. "As a matter of policy, we do not respond to questions or speculation regarding strategic matters, including the capital structure of the company," stated Wally Uihlein, Acushnet’s CEO upon inquiry from the Daily Pulse on the matter.

Despite the rough and tumble times in the golf industry in recent years, the acquisition has been an excellent one for Fila and Mirae Asset. Acushnet has made money hyperflexeach year that it has been in the possession of the Korean Consortium. According to its financial performance, Acushnet has delivered in excess of $121 million in net income over the past three fiscal years alone. At the midway point of 2015, the company has earned another $62.5 million for its owners. The original purchase price was approximately $725 million in cash and $500 million in debt for the company. Over the relatively short time that Fila has had an ownership stake in Acushnet, its stake will have grown to 33% by 2016 as it coverts available bond warrants into equity. Fila's investment position of $100 million was roughly 12% at the outset and will have grown to 33% by 2016 assuming it converts the last tranche of available warrants, according to information publicly available on its web site. Should Acushnet elect to join the ranks of publicly traded companies in 2016, it would also present an open-ended exit strategy for its shareholders. It would in effective eliminate the need to undergo the necessity of future funding if a large shareholder decided to take their money elsewhere some time down the road.

So why sell given the financial performance has been stellar via an initial public offering? In some countries, when investments are made on behalf of public funds, there are covenants that require redemption to be made through the public markets in order to receive an undisputed "fair market value." That could be the case here since it is public knowledge that many of the funds associated with the investors listed (Mirae, Neoplux) emanate from public holdings. Another mitigating factor that could be in play is some of the Koreans investors also probably looked at the Acushnet Company acquisition with an eye on the world's second largest GDP: China. Back in 2011, there was considerable discussion and hope that China could or would repeat the Japan Golf Market growth of 1970-1990. However, the reality that the Golf Course construction ban in 2004 and later the central Government anti corruption campaign (initiated in 2013) have dampened the hopes of many who were looking at China as the golf industry's next platform for growth opportunities. In the meantime, Acushnet must explore its available options based on what it likely knew when it was acquired back in 2011.