Buyout Shops Eye Fortune Brands Break Up

Buyout shops are expected to be all over the Fortune Brands break-up, according to two senior bankers.

Firms that have had Fortune Brands on its radar for some time include The Blackstone Group, Carlyle Group, Kohlberg Kravis Roberts & Co and TPG Capital, said the head of financial sponsors at one bank. “Private equity firms are like hawks,” he said. “They’re motivated by movement, and there’s something happening here that makes this attractive.”

The Deerfield, Ill.-based company announced Dec. 8 that it plans to continue as a pure-play, publicly traded spirits business, while spinning off its home and security business to become an independent, publicly traded company; and selling or spinning off its golf business. The company made the move after pressure from hedge fund investor William Ackman.

As a whole, Fortune has a market capitalization of $9.3 billion across three disparate business lines with little overlap. It’s spirits business, with $2.5 billion in annual revenue, includes Jim Beam and Maker’s Mark-brand bourbons as well as name-brand whiskeys, rums and tequilas. Its home & security business, with annual sales exceeding $3 billion, is the home of Moen-brand faucets, MasterBrand Cabinets and Master Lock padlocks, among other products; and Acushnet Company, its golf business, which has annual sales of $1.2 billion, is led by Titleist, the golf ball maker, and FootJoy, which makes golf shoes and gloves.

Chicago-based investment bank Lincoln International’s Asia team has already started assembling ideas for buyout shops on the expansion of the golf business there, where the sport’s market and popularity have been growing, said Rob Brown, a co-founder of the firm. “Golf, as a whole, is a saturated market in the U.S. and Europe, but in Asia it’s a growth market,” he said. “Every private equity group would love to say they have the Titleist brand in their portfolio.”

Buyout shops would like the home and security business because it’s a good time to buy businesses tied to housing and building products, Brown said. Fortune’s spirits business will likely solicit bids from larger strategics such as Diageo, Brown and others have said in recent media reports.

It’s not clear if any of the buyout shops mentioned above have maneuvered to get ahead of the spin-out process, which should take months. Carlyle Group and TPG, through spokespeople, declined to comment. The other firms did not immediately respond to requests for comment.

The head of financial sponsors quoted said any firms interested will be trying to position themselves accordingly. “If I were an LBO guy, I would position myself as someone who knew management for if and when they decide to go public.”

An analysis of the company’s executives shows limited connections with private equity.

Bruce Carbonari, the company’s chairman and CEO, was an executive at Stanadyne Inc., then the owner of Moen, in 1988 when Forstmann Little bought it for $840 million. Steven Klinsky, the founder of New Mountain Capital, which includes consumer products among its target sectors, was a general partner at Forstmann Little at the time, though it’s unclear if he had anything to do with the Stanadyne deal.

Christopher Klein, president and COO of the home and security business, worked at Bank One Corp. starting in 2001, the same year it created One Equity Partners. Prior to that, he was managing director at Internet Capital Group, a publicly traded investment firm that backs software as a service, business process outsourcing, and internet marketing companies. Internet Capital Group invested alongside numerous buyout shops in 2000, including Nautic Partners, TowerBrook Capital Partners, 3i Group plc, and Graham Partners.

Matthew Shattock, the CEO of the spirits business, and Wally Uihlein, CEO of the golf business, do not appear to have any discernible past relationships with private equity.