'Tailormade' valued at 5 trillion on the market... F&F 'passing' controversy

Centroid Pushes for Sale of 'TaylorMade'
F&F, Holding Right of First Refusal and Prior Consent, Protests "Breach of Contract"

The global top three golf brand 'TaylorMade' has come up for sale, sparking controversy. Centroid PE, a domestic private equity fund (PEF) holding shares in TaylorMade, is pushing for a third-party sale without prior consent from the fashion company F&F, which holds a right of first refusal on TaylorMade. Since F&F, considering acquiring TaylorMade, has stated it will actively respond to this sale, a dispute seems inevitable.

According to industry sources on the 7th, Centroid acquired 100% of TaylorMade shares from the U.S. investment firm KPS Capital Partners in 2021 for 1.9 trillion KRW (then 1.7 billion USD).

At that time, Centroid received financial support from F&F to acquire TaylorMade shares. Initially, investment was promised by The Nature Holdings, which operates the fashion brand National Geographic, but when The Nature Holdings withdrew at the last minute, putting the TaylorMade acquisition at risk, Centroid sought help from F&F.

F&F invested 400 billion KRW (49.51% stake) to secure TaylorMade's growth potential and future management rights, obtaining a right of first refusal and prior consent rights as a precondition for management control. At that time, Kim Chang-soo, chairman of F&F, did not hide his expectations for the acquisition, saying, "We will make TaylorMade a global brand beyond golf." The following year, F&F increased its stake to 57.8% by purchasing fund shares held by Yuanta Securities for 58 billion KRW.

Since then, TaylorMade expanded its business into golf balls and apparel, increasing its value. It grew into a global company by sponsoring famous golfers such as Tiger Woods, Rory McIlroy, and Dustin Johnson. TaylorMade's sales last year were 1.44 billion USD, with an EBITDA of 220 million USD, compared to sales of 940 million USD and EBITDA of 100 million USD in 2020 before Centroid's acquisition. Sales grew by about 50%, and EBITDA more than doubled. The corporate value is estimated to have more than doubled accordingly.

The problem is that F&F, which holds the right of first refusal and prior consent rights on TaylorMade, is opposing the move. It appears that Centroid did not have prior communication with F&F while pushing for the sale of TaylorMade. F&F stated, "We have not received any specific proposals related to this matter and firmly believe that Centroid will faithfully fulfill its commitments," adding, "We are preparing for all situations and will firmly respond to any attempts to infringe upon our legitimate rights and interests."

Until recently, Centroid did not disclose to major investors in investment reports that F&F held prior consent rights in addition to the right of first refusal. Because of this, F&F directly informed investors that it holds prior consent rights on major decision-making matters of the fund. Some investors reportedly strongly opposed this, saying that if prior consent rights are exercised, the sale might not proceed freely. There were also allegations of violations of the Capital Markets Act.

In fact, F&F holding prior consent rights related to major management decisions of the fund may violate the Capital Markets Act. According to Article 249-14 of the Capital Markets Act, fund managers (GPs) are strictly prohibited from delegating the exercise of voting rights on equity securities belonging to the invested company’s assets to a third party. F&F stated, "Centroid, as the GP, actively encouraged investment, and we responded accordingly," adding, "Pursuing a third-party sale without prior notice constitutes a breach of contract."