Fortune Brands Inc., facing pressures from an activist shareholder, announced plans to either sell or spin off its Acushnet Company golf unit, which includes Titleist and FootJoy. The company will also spin off its home and security unit to shareholders in a tax-free transaction while keeping its distilled spirits business.
Fortune Brands said its Board has directed management to develop
detailed separation plans for consideration and final approval by the
Board. The company expects to complete development of these plans –
including the structure, timing, and other related matters for each
business – within the next several months.
In a separate statement, Acushnet CEO, Wally
Uihlein, said, “The
strength of the Acushnet Company as the undisputed global leader in the
golf category, and confidence in our growth prospects, were factors
contributing to the Board's decision.”
He added, “Whether the Acushnet Company is sold to a new owner or
becomes an independent publicly-traded company, our focus will be to
keep on doing what's made us the leader in our industry – the delivery
of best-in-class products and service to our customers and golf
consumers. We look forward to building on our track record of delivering
performance and quality superior golf products to serious golfers
worldwide.”
The statement noted that The Acushnet Company has a history of successful growth
and evolution, even in times of change. Acushnet was founded in 1910
and in 1935 the first Titleist golf ball was brought to market. Fortune
Brands acquired the Acushnet Company in 1976, and Acushnet acquired
FootJoy in 1985. Acushnet Company's net sales in 1975 were $51 million
and in 2009 had grown to more than twenty-fold that number. Over the
past 75 years, the Titleist golf ball has become golf's standard of
excellence, while FootJoy has developed number one positions in the
shoe, glove, sock and now outerwear categories.
“Throughout the history of both brands – and the products
and people that are the essence of the brands – there have been any
number of challenges and new opportunities, and there have always been
shareholders that the business has been accountable to. We have a
strong history of rising to those challenges and taking advantage of
those opportunities, while fulfilling our commitment to our
shareholders,” continued Uihlein. “With our industry leadership, our
strong and unique culture, and our talented team, we look forward to a
successful transition to new ownership and building the bridge to the
next chapter in Acushnet Company's accomplished history.”
The Fortune Brand's Board has directed management to
develop detailed separation plans for consideration and final approval
by the Board. Fortune Brands expects to complete development of these
plans – including the structure, timing, and other related matters for
each business – within the next several months.
The moves comes after Pershing Square Capital Management revealed an 11% stake on Oct. 8. Pershing Square's head, William Ackman, is known as an activist investor who often pushes for changes at companies. He previously pushed for change
at Target Corp. and Wendy's International Inc.
“We are taking the next logical step in the evolution of Fortune Brands, which we believe will maximize long-term value for our shareholders and create exciting opportunities within our businesses,” said Bruce Carbonari, chairman and chief executive officer of Fortune Brands. “Today's announcement is the result of an ongoing strategic review process conducted by the Board and management over the past four years that included regular evaluation of separating the businesses at the right time to serve the best interests of our shareholders. While the breadth and balance of our portfolio have served shareholders very well, we see the potential for even greater value by separating our businesses into focused companies at a time when they have emerged from the economic downturn in such strong positions. We believe now is the right time to move ahead with this tax-efficient approach, and we're confident the course we've outlined today generates greater potential long-term value than all other alternatives.”
He added, “Our proactive strategic initiatives and targeted investments have enabled our businesses to emerge from the economic downturn stronger than even we had anticipated, so each is very well positioned – now – to compete and grow aggressively on its own as the economy recovers. Consistent with our historical and ongoing commitment to creating shareholder value, our Board considered the interests of all of our shareholders, including the views of our long-term shareholders and our largest current shareholder, Pershing Square Capital Management, with whom we found much strategic common ground,” Carbonari continued.
“We have tremendous confidence in the future of each of our businesses. These businesses now have the management, infrastructure and growth and returns prospects to flourish apart from one another and build on their solid foundations of premier brands, leading market positions and strong capital structures. This action plan will enable our shareholders to participate in the substantial upside we expect each of these businesses to generate as they compete in attractive consumer categories with excellent long-term fundamentals,” said Carbonari.
Regarding the golf business, Fortune Brand's statement said, “With annual sales of $1.2 billion, Acushnet Company is the #1 golf
company in the world. Acushnet is led by Titleist, the #1 ball in golf,
and FootJoy, the #1 shoe and glove in golf. Titleist is also a leader in
high-performance golf clubs, and FootJoy is growing strongly in the
performance outerwear category. New-product innovations, including
successive generations of the Pro V1 golf ball plus advanced technology
clubs and shoes, and investments in high growth international markets,
have enabled the company to outperform the market on growth and returns
and position it well for substantial upside in a category with favorable
long-term demographics.”
The company's Beam Global Spirits & Wine, Inc. unit, with $2.5 billion in annual revenue, is the largest U.S.-based spirits company and the fourth largest premium spirits business in the world, according to Fortune Brands.
The company said, “The business has significant opportunities for growth as a direct result of its premium brands in excellent categories, enhanced control of worldwide distribution, successful innovation engine, momentum in key markets, opportunity in emerging markets, and continued brand investment. Beam Global is the world leader in the growing bourbon category, led by the Jim Beam, Maker's Mark and Knob Creek brands. Global brands including Canadian Club whisky and Laphroaig and Teacher's Scotch further enhance the company's whiskey portfolio. With premier tequila brands including Sauza, Hornitos and El Tesoro, the company holds the number two position in tequila worldwide. Courvoisier is one of the world's leading cognacs, and DeKuyper is the leading brand of cordials in the U.S. The company is also growing rising star brands with strong upside potential, such as Cruzan rum, EFFEN vodka and the European Sourz cordials brand. A robust innovation pipeline that has recently produced impactful new products such as Red Stag by Jim Beam, Maker's 46, Cruzan 9, Courvoisier 12 and 21, Teacher's Origin in India and new ready-to-drink products in Australia, is further adding to the company's growth and future prospects.”
Regarding Home & Security, Fortune Brands said, “Fortune Brands Home & Security LLC, with annual sales exceeding $3 billion, is a North American leader in its category. Its largest single brand is Moen, the #1 faucet brand in North America. MasterBrand Cabinets, which includes brands such as Aristokraft, Decorá, Diamond, Omega and Kitchen Craft, is the strong #2 cabinet manufacturer in North America. Therma-Tru, the #1 entry door brand in the U.S., and Simonton, a leader in energy-efficient vinyl-framed windows, are both well positioned in the attractive advanced materials segments of their categories. Master Lock is the world's #1 brand of padlocks and related security products, and Waterloo is a leader in storage and organization products. Home & Security has enhanced its position by playing offense during the downturn and front end of the recovery. The company has created lean and flexible supply chains by both reducing costs and accelerating productivity initiatives. Significant new business wins, excellent customer service and successful new-product innovations have contributed to meaningful market share gains. With this momentum, combined with the company's supply-chain flexibility and efficient cost structures, Home & Security will have substantial leverage and upside growth and returns potential as the U.S. housing market recovers.”
In addition to final Board authorization, the potential separation of Fortune Brands' companies will also be subject to the receipt of a number of customary regulatory approvals and/or rulings, the execution of intercompany agreements and finalization of other related matters.
