Heisei, the prominent pachinko manufacturer, has announced its acquisition of Accord Golf for 510 billion yen, marking a significant shift from traditional gaming pursuits to the flourishing golf market. This acquisition, confirmed on December 18, 2023, involves Heisei purchasing all shares of Accord Golf from the Fortress Investment Group, indicating Heisei's intent to navigate away from stagnation caused by the declining pachinko sector.
Accord Golf, known for owning 173 golf courses throughout Japan, is set to strengthen Heisei’s footing as it looks to cultivate new consumer bases, particularly targeting younger and female golf enthusiasts. This transition highlights the company's response to changing leisure preferences, as the pachinko market faces challenges due to generational shifts and tightening regulations.
The acquisition process is projected to be completed by the end of January 2025 and will be financed through loans from Sumitomo Mitsui Banking Corporation and Mizuho Bank, enabling Heisei to also take on Accord Golf's existing debts. Notably, this strategy is part of Heisei’s broader vision, recognizing the potential of golf’s resurgence, especially as the overall market begins to recover.
According to Jiji Press, Heisei considers the merger of its golf subsidiary, Pacific Golf Management (PGM), which operates 148 golf courses, with Accord Golf as beneficial for reducing procurement costs. By leveraging their combined market presence, Heisei aims to wield increased purchasing power and streamline operations, hence cutting overhead costs.
Heisei’s spokesperson stated, “We view the union of the top two golf courses as beneficial for reducing procurement costs.” This reinforces the company's strategic aims to meld operational strengths and pursue synergies between their respective brands and customer bases.
Reported by Nikkei, the golf market is currently witnessing signs of recovery after the downturn caused by the COVID-19 pandemic. Estimates indicate the golf market will see a resurgence to approximately 939 billion yen in 2023, representing about 4% growth when compared to 2022.
Despite the market's recovering financial health, challenges linger for the golf industry. Participation rates have declined appreciably, plummeting from 13 to 15 million players in the 1990s to just 5.3 million participants today. Companies within this space face the pressing challenge of attracting new demographics, especially focusing on promoting golf to younger audiences and appealing to inbound tourism as those returning to Japan seek leisure activities.
Interestingly, this acquisition is not without historical nuances. PGM once attempted to acquire Accord Golf through a hostile takeover bid back in 2012, which was unsuccessful. Following this, Accord Golf was acquired by MBK Partners, which took the firm private, followed by Fortress Investment Group's subsequent purchase. This series of ownership changes paints a picture of the volatility and competition within the golf management field.
The combination of PGM and Accord Golf under Heisei's umbrella would create one of the largest golf course management companies globally. Collectively, these entities would not only bolster Heisei’s market share but significantly amplify its operational capacity.
With projected revenues for the fiscal year ending March 2024 estimating combined sales of approximately 256.1 billion yen and operating profits reaching around 48.6 billion yen, this merger is poised to flip the narrative on golf's profitability against Heisei's heritage gaming machines business. This reflects over 80% of the combined operation's revenues stemming from golf-related activities, surpassing traditional revenue sources connected to pachinko.
While the DE ratio (debt to equity ratio) of Heisei currently stands at 0.46, which is considered strong against the benchmark of 1.00, the new debt legacy from this acquisition could shift this dynamic. An approach to balancing this new financial burden will be imperative as Heisei integrates Accord Golf's operations and navigates its future.
Industry experts agree this strategic shift places Heisei on the right path, particularly considering the changing leisure activity preferences among younger audiences, echoing their intent to evolve beyond the limitations of the pachinko business model. The successful integration of Accord Golf could very well set the stage for Heisei’s next chapter, marrying its legacy with the rising tide of golf culture within Japan.
With anticipation building around the effective execution of this merger, the golfing community awaits to see how Heisei will instigate growth and innovation across both its business model and the golfing industry at large.
