F&F Launches Full-Scale Bid for TaylorMade as Tensions Escalate with Centroid

F&F Calls for Suspension of Sale Process
Centroid Sends Teaser Letter to Overseas Buyers
Legal Dispute Between Both Sides Likely to Escalate

F&F is moving to acquire the golf brand TaylorMade. As Centroid Investment, the private equity fund manager currently holding management control of TaylorMade, has initiated the sale process, F&F is countering by claiming that Centroid proceeded with the sale without its consent. This is expected to lead to a dispute between the two parties.

According to the investment banking (IB) industry on June 26, F&F stated in an official announcement regarding the sale of TaylorMade, "As the largest investor, F&F made a strategic investment from the beginning with the intention of acquiring TaylorMade, and this direction remains unchanged."

F&F was the largest investor in 2021 when Centroid acquired TaylorMade for approximately 2 trillion won, investing 553.7 billion won of fund capital. F&F asserts that it committed to the investment on the premise of acquisition and secured rights such as the right of first refusal and prior consent. Therefore, F&F maintains that Centroid's current sale to a third party is unjustified.

Recently, Centroid has begun the formal sale process by sending an investment teaser letter to potential buyers through JP Morgan and Jefferies, the lead managers for the sale of TaylorMade. It is reported that the teaser letter was mainly sent to overseas buyers, considering that TaylorMade is headquartered abroad and is a large-scale asset valued at 4 to 5 trillion won.

Industry insiders believe that, since F&F is the largest investor and holds the right of first refusal, TaylorMade will ultimately end up in F&F's hands. However, the key issue is whether Centroid was required to obtain F&F's consent for the relevant procedures before proceeding with the sale.

During the 2021 acquisition of TaylorMade, Centroid and F&F drew up a separate agreement. The agreement granted F&F prior consent rights for major financial decisions, including the authority to appoint directors and conduct an initial public offering (IPO).

Centroid argues that the scope of F&F's prior consent rights does not include the sale, and that the authority to sell rests with itself as the general partner (GP). Conversely, F&F maintains that the prior consent rights do include the sale.

The agreement between F&F and Centroid, which includes the details of the prior consent rights, has sparked controversy as it was a side contract unknown to other investors who participated in the TaylorMade acquisition. In this case, there were suggestions that it could be a violation of the Capital Markets Act, but the prevailing view in the industry is that this argument is difficult to accept.

An industry official explained, "While the side agreement could potentially violate the Capital Markets Act, regulatory authorities generally only intervene when general investors have suffered losses. Since this contract is based on a dispute of interests between corporations and institutional investors, it is unlikely that the authorities will intervene easily."

If Centroid's current sale process is ultimately deemed legitimate, F&F would have to acquire TaylorMade at the price offered by a third-party buyer. In this scenario, F&F's calculations become more complicated, as it may have to purchase TaylorMade at a price higher than its own internal valuation.

In this regard, Shim Junseop, managing attorney at Law Firm Shim, explained, "The right of first refusal allows F&F to purchase on the same terms if a third party makes an offer, but to exercise this right, F&F must have the necessary funds ready. Usually, a decision must be made within a short period, typically about 14 days."

Accordingly, if F&F decides to exercise its right of first refusal, it is highly likely that domestic private equity fund managers will join the acquisition battle as F&F's allies. It is also reported that large private equity fund managers are already making behind-the-scenes contact with F&F.

F&F may also pursue legal action to halt the TaylorMade sale process, citing its prior consent rights.

Yoon Sanghyun, managing attorney at Law Firm Hyunlim, predicted, "F&F is likely to seek a provisional injunction to suspend the sale and will try to have the court confirm that the prior consent right is a valid contract." He added, "Complex commercial disputes can take one to two years even at the first trial, and even longer if appealed. During that time, the value of TaylorMade could fluctuate, and a good buyer might be lost, so F&F may be aiming for this outcome."

Some believe that while both sides are continuing their standoff, they are also preparing to sit at the negotiating table. Attorney Shim explained, "It would be a better option for both parties if F&F forms a consortium to participate directly in the acquisition or seeks a business-oriented solution by finding common ground on the sale conditions."