Centroid Proceeds with TaylorMade Sale Process
High Valuation Makes Sale Challenging
Focus Shifts to F&F with Right of First Refusal
Centroid Investment (hereafter Centroid) is continuing its efforts to sell TaylorMade. Although it is being discussed as the largest deal of the year with a price tag of 5 trillion won, industry insiders believe that the transaction will not be easy due to the high valuation. As a result, attention is turning to F&F, which holds the right of first refusal.
According to the investment banking (IB) industry on June 5, Centroid has selected JP Morgan and Jefferies as its financial advisors and is proceeding with the sale of management rights. Since Chinese and Middle Eastern strategic investors (SIs) have been mentioned as potential candidates, Centroid is expected to send teaser letters to these parties to gauge their interest in acquiring the company.
Centroid is seeking a sale price of approximately 5 trillion won, which is more than double the 1.7 billion dollars (2.15 trillion won at the exchange rate at the time) it paid to acquire TaylorMade in 2021. This valuation is based on TaylorMade's average annual growth rates of over 10% in net sales and over 15% in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) over the past five years.
However, with increasing domestic and global uncertainties and growing concerns over an economic slowdown, the industry believes it will be difficult to find a buyer. As a result, there have been rumors in the financial sector that Centroid is preparing for a long-term sale through a recapitalization. Centroid, however, responded that these rumors are "groundless."
Previously, Crescendo Equity Partners, which attempted to sell HPSP, postponed the sale by partially recouping its fund investment through a recapitalization, such as raising acquisition financing loans secured by HPSP shares. This was due to growing macroeconomic uncertainties stemming from U.S.-imposed tariff risks. Industry analysts believe that Centroid may also pursue a similar recapitalization strategy.
Now, attention is focused on F&F, which holds the right of first refusal. F&F has consistently expressed its intention to acquire TaylorMade. For F&F, acquiring TaylorMade would provide a foundation to become a fashion company with a major global brand presence. F&F invested 558 billion won in the acquisition of TaylorMade in 2021.
If F&F exercises its right of first refusal, it is expected to raise large-scale acquisition financing. Assuming that F&F Holdings' cash and cash equivalents at the end of the first quarter this year (207.5 billion won) and TaylorMade's EBITDA last year (321.3 billion won) are set as repayment sources, it would be possible to raise acquisition financing of around 3 trillion won, which is within the leverage limit (5 to 6 times).
However, in this case, TaylorMade's valuation remains an issue. Even with the previous investment of 558 billion won added, the total does not reach 5 trillion won. In addition, if a third-party sale offer is made, F&F must purchase the shares under the same conditions within 14 days, which could be a burden for the company. Regarding this, an F&F representative said, "As the largest investor, we will appropriately exercise our rights related to this investment to ensure that our investment objectives and interests are protected," but declined to comment further.
An IB industry official commented, "If F&F exercises its rights, it could discourage competitors, reducing bidding enthusiasm. However, F&F could also be saddled with a heavy acquisition financing burden. It is expected that Centroid and F&F will engage in a tug-of-war over the sale price and eventually find an appropriate valuation."
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