A report by the Dallas Morning News considers whether Apollo Global Management’s $1.1 billion acquisition of the Dallas-based owner/operator of clubs could be a positive for the industry, with Jay Karen, CEO of the NGCOA, noting that, “A company would not invest so heavily if there was not a bright spot.”
As C&RB reported on July 10, ClubCorp, the Dallas operator of hundreds of private golf and country clubs, recently agreed to be acquired in a $1.1 billion all-cash transaction that would take the company private.
The deal with New York-based Apollo Global Management—one of Wall Street’s largest private equity firms with assets upwards of $197 billion—is expected to close in the fourth quarter. Golfing experts are closely monitoring the deal to track what its long-term impact could be on more than 200 golf, country, business, sports and alumni clubs in the U.S. and abroad, the Dallas Morning News reported.
The transaction comes at a time of turmoil in the golfing and private club industry, analysts say. Some point to one fundamental problem, the Morning News reported.
“Culture,” said Larry Hirsch, president of Golf Property Analysts. The member-owners of the private club world “just don’t get it,” he said. “They’re not doing a good job of welcoming millennials, minorities and moms, the three M’s. The air and culture of exclusivity can be seen as a turnoff to certain groups.”
ClubCorp had been on a search for an investor for months as it continued to suffer from lagging membership and significant financial loss. Its revenue was $221.3 million and adjusted earnings $43.7 million in first quarter, but the company also reported liabilities and long-term debts that totaled more than $1.9 billion, the Morning News reported.
The big question now is whether new life can be breathed into the flailing industry. There is reason for optimism. “A company would not invest so heavily if there was not a bright spot,” said Jay Karen, Chief Executive Officer of the National Golf Course Owners Association.
The private club industry is entering a renaissance, Karen said, in which many are modernizing their approach and literally upping their game. Additionally, golf clubs are a land-intensive business. ClubCorp’s real estate was valued at approximately $1.5 billion in early 2006, according to a report in Golf Digest. This type of real estate typically comes with restrictions that limit their ability to be redeveloped or turned into something new, the Morning News reported.
“And there’s local interest in keeping that business going, with homeowners being the natural buoy,” Karen said. “It’s not like a franchise in a shopping mall. Golf courses are hard to shut down.”
ClubCorp and Apollo both declined to comment. However, in public statements over the past week, they both indicated a plan to grow, not shrink. In a letter to an estimated 430,000 members, ClubCorp said the deal would help the facilities to continue to provide “unrivaled experiences,” the Morning News reported.
“Apollo’s philosophy is to seek investments in industry-leading companies and support company management in achieving their strategic plan,” the letter said.
Apollo’s portfolio includes industry leaders like ADT and AMC Theaters, as well as other hospitality businesses like Norwegian Cruise Lines and Diamond Resorts International. It also manages Irving-based Chuck E. Cheese’s, which it took public in 2014 in a $1.3 billion deal and is rumored to be in talks to sell for nearly double that amount, the Morning News reported.
ClubCorp went public in 2013, raising $252 million at $14 per share on the first day on the stock exchange. It has been in the process of acquiring properties rapidly over the past few years, including eight in 2016 and three so far this year. It renovates and adds additional services to the properties. The ClubCorp portfolio had 162 golf and country clubs and 45 business, sports and alumni clubs in the first quarter, the Morning News reported.
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