A dispute triggered by the proposed sale of equipment maker TaylorMade Golf by its majority owner took a new turn with the owner, Korean private equity firm Centroid Investment Partners, threatening to pursue expulsion of Seoul-based apparel company F&F Co. Ltd. as a TaylorMade investor, according to a report published Monday by eDaily, a Korean economic news outlet.
Centroid, which bought TaylorMade from American private equity firm KPS Capital Partners for $1.7 billion in 2021, and F&F, which helped finance the deal and is believed to own nearly 50 percent of the company, have been at odds since early this year when Centroid first signaled it would consider selling the brand, contrary to its previously stated plans to take TaylorMade public. Centroid’s latest move, undertaken in tandem with other limited partners, according to the eDaily report, comes in response to F&F’s opposition to a sale – the apparel maker believes the terms of the 2021 acquisition grant it a right of first refusal to match the highest offer to buy TaylorMade and own the business outright, and a consent right that includes the right to block any transaction.
Centroid is considering seeking expulsion of F&F as an investor to protect the interests of its other limited partners should F&F’s efforts to block a sale intensify, according to the report. A provision in the TaylorMade investment fund’s articles of incorporation allows shareholders to pursue expulsion of an investor in court for causes that include failure to fulfill investment obligations, misconduct and unauthorized representation, the report said. It added that an expelled investor will be refunded only 50 percent of its investment capital, with the payment potentially delayed until after the fund is liquidated. But because expelling investors against their will can adversely impact their financial interests so significantly, Korean courts apply strict standards to expulsion requests, the report said.
“The TaylorMade brand is strong enough so that the company will survive, but it may lose a bit of competitive edge.” — Andrew Zimbalist, Smith College professor emeritus of economics
The expulsion threat is the latest chapter in a saga that gained steam in the spring when Centroid hired investment banking firms JP Morgan and Jefferies to manage a sale of TaylorMade, aiming for a valuation of $3.5 billion, based on comparisons to the Acushnet Company, parent of the Titleist and FootJoy brands and a publicly traded subsidiary of Fila Holdings Corp. Through its attorneys, F&F gave notice that it would exercise its right to approve major corporate decisions should a sale proceed, but Centroid maintained that a sale would not fall under F&F’s approval rights, South Korean newspaper The Chosun Daily reported in May.
Last month, F&F said it hired investment bank Goldman Sachs to advise on an acquisition of TaylorMade and that it would take legal action if Centroid proceeds with a separate sale process, Reuters reported. The report cited a statement in which F&F said it participated in the 2021 TaylorMade acquisition as “a strategic investor and, as the largest investor, secured written Consent Rights over key management matters, including borrowing, major business decisions, and equity sales.” The statement added that F&F has not consented to Centroid’s effort to sell TaylorMade and views it as a significant breach of its contractual consent rights.
The contretemps playing out an ocean away from TaylorMade’s Carlsbad, California, headquarters is not impacting the equipment maker’s day-to-day operations at this juncture, according to industry sources. But the dispute figures to shape the brand’s future, and not necessarily in a positive way, according to a noted sports business observer quoted in an Aug. 1 Bloomberg report about the tiff.
“The TaylorMade brand is strong enough so that the company will survive, but it may lose a bit of competitive edge,” said Andrew Zimbalist, a professor emeritus of economics at Smith College, who added that the conflict portends “an intense, distracting and expensive legal battle.”