Hedge funder and “activist shareholder” William Ackman may get his way with plans to split Fortune Brands into three separate entities, perhaps selling off the seminal Titleist name to one of its golfing competitors. Ackman’s Pershing Square Capital Management owns 11 percent of the company.
Fortune Brands always has been a bit of a Frankenstein monster, owning a variety of seemingly disconnected lines such as Titleist, Jim Beam, Makers Mark, Moen Faucets, and Masterlock. Fortune Brands is descended from tobacco giant American Tobacco, which was chartered in 1890. Following a Supreme Court ordered break up in 1911, American Tobacco diversified into a variety of alcohol, office (Acco) and home wares products. It changed its name to American Brands in 1969, and became Fortune Brands in 1997. Brown and Williamson acquired the tobacco division in 1994.
Acushnet (Titleist) began as a rubber processing company in 1910. In 1932, it expanded its line to golf balls. Fortune Brands acquired the company in 1976. Fortune bought Foot-Joy in 1985 and Cobra Golf in 1996.
Ackman is a prototypical corporate raider, who apparently wants to turn over his Fortune Brands stake into quick profits by selling off parts of the company. He’s been involved in several other machinations lately, including trying to acquire five seats on the Target board of directors, and acquiring a significant stake in JC Penny. That last action prompted Penny to begin anti-takeover actions. Tax issues apparently present the biggest obstacle to Ackman’s plans.
As it is now, Ackman apparently hopes that Callaway or Nike will buy the golf brands, and that Bacardi or Diageo will buy the spirits division. I frankly don’t see any good coming from this. The golf business already is an oligopoly, and this will just continue that trend. Nothing is served—other than Ackman’s bank account—by increasing that trend.