Apollo Global Management LLC is betting that the beleaguered golf industry is finally getting out of the rough.
The private equity firm agreed to pay $1.1 billion for ClubCorp Holdings Inc., a country-club operator whose properties include California’s Mission Hills and the Woodlands in Texas. Apollo is gaining hundreds of thousands of members in the bargain, providing a steady source of cash.
The deal follows a challenging stretch for the golf industry, which saw participation decline after a peak in 2003. Hundreds of courses have closed in recent years, and the slump rocked both retailers and equipment manufacturers. Golfsmith International, the biggest golf chain, filed for bankruptcy last year. And Nike Inc., which had hitched its golf fortunes to Tiger Woods’s career, stopped selling equipment for the sport.
But golf’s core participants remain enthusiastic, and Apollo is getting ClubCorp’s more than 430,000 members -- an affluent and reliable set of customers.
“We plan to leverage Apollo’s resources and expertise while working with ClubCorp’s dedicated team to continue to grow the business,” David Sambur, a senior partner at Apollo, said in a statement Sunday.
ClubCorp’s investors will receive $17.12 a share in cash in the transaction, a 31 percent premium over the closing stock price on July 7. The shares rose to $17.06 on Monday, just short of the deal price.
Too Low?
The nature of ClubCorp’s business makes it a logical target for a private equity firm, Stifel Financial Corp. analyst Steven Wieczynski said in a note. The question is whether investors are getting a fair price, he said. The transaction equates to a roughly 7.5 multiple on estimated earnings before interest, taxes, depreciation and amortization for 2018. He sees a multiple of as much as 8.5 -- equivalent to a price of $20 a share -- as a better representation of ClubCorp’s steady business.
Takeover speculation began heating up in January, when Dallas-based ClubCorp announced that it had hired Jefferies Group and Wells Fargo & Co. to evaluate options. In May, the company added two new independent contractors in an agreement with activist shareholder FrontFour Capital Group.
The company had attracted critics who said golf’s decline would hamstring the business. Last year, short seller Kerrisdale Capital Management targeted ClubCorp, noting that participation in golf was shrinking, particularly among younger players, and that operating golf clubs was a capital-intensive business.