TaylorMade's Corporate Value Doubles in One Year Amid US Golf Boom

[Asia Economy Reporter Park So-yeon] The enterprise value (EV) of TaylorMade, one of the world's top three golf companies, has doubled in just one year. As the U.S. golf market enjoyed a record-breaking boom for two consecutive years due to COVID-19, TaylorMade's performance and valuation soared.

According to the investment banking (IB) industry on the 24th, TaylorMade's current EV is estimated at $3.3 billion (approximately 3.96 trillion KRW), about twice the enterprise value ($1.71 billion) when the private equity fund (PEF) operator Centroid Investment Partners (hereafter Centroid) acquired it in August last year.

Centroid valued TaylorMade at $1.71 billion, which was about 15 times the EBITDA before depreciation at the time of acquisition in August last year.

Applying the multiple of 15 times used then to TaylorMade's 2021 EBITDA forecast ($220 million) results in a current EV of approximately $3.3 billion.

The original acquisition financing structure consisted of about $710 million in senior acquisition financing (interest rate in the high 4% range), about $220 million in mezzanine acquisition financing (interest rate in the mid-7% range), about $400 million in mezzanine financing, and about $500 million in equity.

Excluding the repayable acquisition financing and mezzanine totaling about $1.4 billion, $1.9 billion is allocated to equity. Considering the equity principal was $500 million, it has already quadrupled.

The main reason for TaylorMade's EV surge is the boom in the U.S. golf industry due to COVID-19. TaylorMade has shown continuous growth over the past five years, but especially in 2021, it recorded significant growth compared to the previous year.

Improved sales of new products across various categories such as golf clubs, golf balls, and golf bags in countries including the U.S., Korea, Europe, Canada, and Australia were the main factors.

According to Golf Data Tech, the number of rounds played at U.S. golf courses in the first half of last year increased by 23% compared to the same period the previous year, far exceeding the average growth rate of 19% from the first half of 2017 to 2019. The number of rounds at public golf courses increased by 26%, and rounds at private golf courses increased by 13%.

According to the National Golf Foundation, over 100 million people in the U.S. either played golf directly or watched golf in 2020. This corresponds to about one-third of the entire U.S. population.

The number of people who went directly to golf courses to enjoy rounds was counted at 24.8 million, and those who enjoyed golf at entertainment spaces such as driving ranges were counted at 12.1 million. Combined, a total of 36.9 million people played golf at least once annually.

The increase in young golfers is also a noticeable change. Among young adults aged 18 to 34, 10.9 million played golf directly in 2020, accounting for about one-third of the golf population that year.

Thanks to TaylorMade's performance growth, refinancing rates are expected to become more favorable. Centroid is currently conducting refinancing of TaylorMade's acquisition financing, and the lending syndicate, previously composed of Korean financial institutions, has been completely replaced by global securities firms.

For senior and subordinated loan refinancing, U.S. JP Morgan was selected as the lead underwriter, with Morgan Stanley and Bank of America as joint bookrunners. Previously, the acquisition financing was arranged by domestic financial institutions such as KB Kookmin Bank and Hana Financial Investment.

An IB industry official said, "Global securities firms in the U.S. that confirmed TaylorMade's performance growth made various proposals for refinancing, and as a result, it is expected that the interest rate can be reduced by about 2 percentage points compared to the current acquisition financing rate. Due to the impact of the new driver 'Stealth,' it is expected to surpass the record performance of 2021, and the bidding competition among lenders is intensifying, so stable closing is expected in early February."

Through refinancing, TaylorMade and equity investors are expected to reduce interest burdens by more than 15 billion KRW annually.