Topgolf Callaway Brands Corp. said it will create two golf companies, each with a strong balance sheet, positive free cash flow and the scale required to lead its respective market. One, Callaway, will trade in golf equipment, while the other, Topgolf, will be a pure-play venue-based golf entertainment business.
Callaway, a classic golf company, generated revenues over the last 12 months through Q2 2024 of approximately $2.5 billion (Toptracer included). Topgolf, on the other hand, generated revenues over the same period of approximately $1.8 billion (Toptracer excluded).
The parent company expects to effect the separation by spinning off the Topgolf business to Topgolf Callaway Brands’ shareholders. It intends the transaction to be free of US federal income tax for both the company and its shareholders. Although the spin-off is the most likely separation path, the company will continue to evaluate other options to maximize shareholder value.
“We believe this business, on a stand-alone basis, will be well understood and valued by the market,” said Chip Brewer, President and CEO of Topgolf Callaway Brands. “Since our merger with Topgolf, we have made considerable investments in the Topgolf business that have dramatically expanded its scale, digital capabilities and venue profitability. These investments, combined with the hard work of the Topgolf team, have allowed us to outperform our original growth and free cash flow expectations. We remain convinced that Topgolf is a high-quality, free cash flow generating business with a significant future value creation opportunity.”
Strategic rationale
The company believes that creating two companies will benefit the stand-alone businesses that will maximize shareholder value. These include:
- Enhanced strategic focus: The transaction would create two strong, focused companies with industry-leading market positions and a greater ability to align incentives with performance and shareholder value creation.
- Optimized capital allocation: Callaway and Topgolf have different free cash flow profiles and funding needs. The separation would position both for suitable capital investment while maintaining suitable leverage.
- A simplified operating structure to improve execution and organizational agility.
- A distinct investment thesis for each entity: As separate businesses, Callaway and Topgolf would represent different and compelling investment opportunities. Investors could support and invest in each business for its distinct qualities (growth drivers, financial profile, capital allocation framework). Furthermore, separating Callaway and Topgolf would simplify financial reporting for investors.
Management is developing detailed separation plans for further consideration and final approval by the Board of Directors. The company hopes to execute the spin-off of Topgolf in the second half of 2025, but it cannot guarantee the timing, the terms of the separation or even the separation’s occurrence.
