New York-based First Atlantic Capital lined up an investment in the golf industry, acquiring Golfsmith in a deal that gives it a majority interest in the golf equipment and accessory retailer. The transaction closed Oct. 17.
Financial terms of the deal were not disclosed, but First Atlantic CEO and Chairman Roberto Buaron told Buyouts the purchase price was in excess of $100 million. Equity was supplied by First Atlantic and Golfsmith management, while Jefferies & Co. arranged the debt through a private placement of senior notes. The deal was consistent with First Atlantic’s strategy of investing in companies with a $75 million to $300 million enterprise value and providing $20 million to $100 million of equity.
First Atlantic used Atlantic Equity Partners III L.P. for the acquisition, which represents the fund’s fourth investment so far, joining Allied Office Products, Peek Ltd. and Ranpak Corp. in the fund’s portfolio of companies. The fund held its final close in January 2001 with $350 million and, following the Golfsmith acquisition, has roughly one-third of that left to spend.
“With [the Golfsmith] acquisition, we will continue our strategy of taking an active role in growing our portfolio companies in partnership with management through strategic add-on acquisitions, improvements in operating performance, and appropriate changes in business strategy,” Buaron said.
Golfsmith is a multi-channel, specialty retailer of golf equipment, with 24 superstores throughout the U.S. and successful catalog and Internet operations. The Texas-based company offers equipment from the industry’s top manufacturers, such as Callaway, Ping, Titleist, Nike and others, and the company also markets clubs, components and accessories under its own brands, which include Golfsmith, Harvey Penick, Lynx, Snake Eyes and Killer Bee. Additionally, the company runs the Harvey Penick Golf Academy as well as a school that teaches clubmaking. Last year, Golfsmith chipped in more than $200 million in revenues, marking an improvement from its performance in 2000 despite the lackluster economic environment.
First Atlantic Principal Noel Wilens said that while golf courses have taken a hit in the latest recession, Golfsmith has been able to continue showing steady growth. He attributes this to the new products introduced by the OEMs of the golf industry.
First Atlantic will look to build on Golfsmith’s existing retail expansion strategy, and Buaron said the firm will move to bolster the company’s catalog and online businesses as well. The firm intends to add new stores in both Golfsmith’s existing markets, to add density, as well as new markets, in order to establish Golfsmith’s presence throughout the country. First Atlantic will also be keeping its eyes open for add-on acquisitions that could either expand Golfsmith’s branded product line or extend the reach of its retail operations.
Golfsmith’s management team will essentially stay in place. Jim Thompson, formerly Golfsmith’s senior vice president of merchandising and retail operations, has been tapped to head the company as president and CEO, while Carl and Franklin Paul, the founders of Golfsmith, will each maintain a substantial ownership position and board representation. First Atlantic Managing Director Charles Shaw, meanwhile, will takeover chairman duties of the company.
First Atlantic Capital, with approximately $490 million under management, focuses its investments on both private and publicly-owned middle-market companies, as well as orphaned divisions of large corporations. So far in 2002, the firm has been active on the exit front as well. In May of this year, the firm, along with JPMorgan Partners and Aetna Life Insurance Co., exited its investment in Berry Plastics, selling the company to GS Capital Partners for $837.5 million.