New York, NY, May 5, 2004 — After an auction that lasted several weeks, New York private equity firm Falconhead Capital said it has selected a winning bidder for its portfolio company The Golf Warehouse, an online golfing equipment retailer.
David Moross, Falconhead chairman and chief executive officer, wouldn't identify the name of the bidder nor would he disclose the amount of the sale, which is expected to close by the end of June.
Moross said Falconhead selected the winner Wednesday after considering offers from 16 potential buyers including other private equity firms and strategic investors.
Falconhead acquired a majority interest in The Golf Warehouse in late 1999, in an undisclosed all-equity investment after eyeing a big market opportunity in a new but growing Internet retail market space, Moross said.
Founded in 1997 by three brothers - Mark, Mike and Rick Marney - who retained a 28% interest in the company after Falconhead's investment - The Golf Warehouse was started on a shoestring budget and a passion for golf the three nurtured while playing it at Oklahoma State University.
"They used to buy things off credit cards," said Moross, whose firm specializes in private equity investments in the leisure, lifestyle, sports and media sectors. "These guys weren't overspending on marketing. We liked them because they wanted to make the business profitable first."
But the Wichita, Kan. company needed capital to grow, Moross said.
Under Falconhead's watch, The Golf Warehouse grew fast, establishing a partnership with Amazon.com Inc. (AMZN) and benefiting from Falconhead's partnership with IMG. A leading sports representation firm, IMG assisted The Golf Warehouse with vendor relationships and access to star golf players whose photos the retailer would later feature in a popular off-line catalogue for the holiday season.
The catalogue was a huge success, Moross said.
Before then, The Golf Warehouse went from generating $1 million in sales in 1997 to just over $6 million in 1999. But it wasn't until after Falconhead came on board with an undisclosed investment that numbers really started to grow. A recapitalization with an undisclosed infusion of debt financing followed in 2003, delivering to Falconhead's limited partners over 50% of their original investment. Last year, The Golf Warehouse's annual sales, which are primarily in North America and Western Europe, jumped to close to $50 million.
Today the company has 120 employees.
The Golf Warehouse investment is part of Falconhead's $215 million first fund invested in half a dozen companies including Stonewater, Tickets.com, ESPN Classic Sport Europe, Maritime Telecommunications Network and National Powersport Auctions.
Falconhead has about 60 investors, including the California Public Employees' Retirement System and the BNP Paribas Group.
-By Giada Cardoletti, Dow Jones Newsletters/VentureWire