American Golf's owner tees off talks for £80m sale

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The Independent Online

The private equity arm of Lloyds Banking Group has kicked off talks with corporate finance advisers over a sale of American Golf, the UK's largest specialist golf retailer, for as much as £80m.

Lloyds Development Capital (LDC) has held discussions with teams at Deloitte and Rothschild about them running a process to sell American Golf, which has 83 stores. Talks are believed to be at an early stage and all three parties declined to comment.

LDC acquired American Golf in a deal worth £40m in 2004. While its over-leveraged capital structure forced it into a debt-for-equity swap in early 2010, the retailer has grown profits recently, made an acquisition and opened a number of stores.

American Golf is thought to have delivered earnings before interest, tax, depreciation and amortisation of about £5m for the year to 31 January 2011, a 40 per cent jump on the £3.55m posted the previous year. For the financial year just ended, the retailer is believed to have increased sales by more than a fifth to about £87m, boosted by its online operation and six new stores.

The company is thought be gunning for underlying earnings (Ebitda) of £8m and sales higher than £100m this year, which could see LDC demand a price tag of up to £80m for the chain. LDC backed American Golf's acquisition of Online Golf, Europe's leading internet specialist for golf equipment, for an undisclosed sum in March 2010.

But American Golf has occasionally veered off course into the rough. It made a pre-tax loss of £4.5m for the year to 25 January 2009. Then in early 2010, the retailer converted £13m of debt to equity and the shares in the chain were split between LDC, NatWest and the retailer's management team.