ClubCorp forms committee to investigate options, including a possible sale

January 17, 2017
By Jack Crittenden
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Less than four months after an investor called on ClubCorp to consider selling itself, the public company may be doing just that, according to sources and a recent U.S. Securities and Exchange Commission filing. The Dallas-based company said it has formed a committee to review and evaluate alternatives.

“The committee is focusing on opportunities to further unlock the value inherent in the company,” ClubCorp said in filing. “The committee is evaluating opportunities with a focus on maximizing value for all shareholders.”

Reuters reported that the world’s largest owner of private clubs is in the early stages of an auction process that has attracted interest from private equity firms and other potential buyers.

In September, FrontFour Capital criticized ClubCorp’s stock and called for the company to “retain an investment bank to pursue any and all strategic alternatives, including an outright sale of the company.”

FrontFour owns 3.4 percent of ClubCorp’s outstanding shares. At the time, ClubCorp’s stock was $14.25 per share, down 36 percent from the prior year. Since then, the company’s stock plunged to a low of $10.90 in early November, but has rebounded to $16.50. FrontFour has valued the stock at $27.

It said a sale would enable ClubCorp to pay off some of its debt and, in the process, boost the value of its under-performing stock. It said ClubCorp owns the land at 126 of its 160 golf and country-club properties, for a total of roughly 30,000 acres. That land is worth $1.5 billion.

“We believe that ClubCorp’s portfolio of assets, which includes 30,000 acres of fee simple acreage, would garner significant strategic and financial interest from a variety of parties,” FrontFour wrote. “Given ClubCorp’s currently depressed valuation, projected decline in capital expenditures and the potential near term exhaustion of tax mitigation strategies, the strategic alternatives process should consider whether the right time is approaching for a conversion to a [real estate investment trust] in order to unlock significant value.”

The committee will work Wells Fargo Securities as financial advisers and the company’s management team to “oversee the review process.” It will report its findings directly to ClubCorp’s board of directors.

Affeldt has said the company's story and financials are not well understood, primarily because it is the only public golf entity in the U.S.

Last April, Kerrisdale Capital Management drew attention to ClubCorp’s “billion-dollar debt burden,” its annual losses, the lack of membership growth at its “same-store” properties, and its weak profit margins, and the Street recommended that investors sell their shares in the company.

KSL Capital, a private equity firm, acquired ClubCorp in 2006 for $1.8 billion, Reuters reported. It took the company public in 2013. 

 

 

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