Topgolf Callaway Brands’ split into two independent companies, announced Sept. 4, won’t happen for at least nine to 12 months, which leaves plenty of time for the company to put the mechanisms in place to spin off Topgolf into an IPO, or even find an outright buyer for the golf entertainment giant.
“We have evaluated all of the options in front us and we’re viewing the spin as attractive and likely to create significant shareholder value,’’ Topgolf Callaway Brands President/CEO Chip Brewer told Wall Street analysts on Sept. 4.
Chip Brewer
That said, there still are a lot of questions to be answered over the next several months, but barring any surprises, here’s how things could play out:
- Callaway will consist of the company’s existing golf equipment, Toptracer and active lifestyle businesses. These businesses generated revenue of approximately $2.5 billion for the past 12 months through Q2 2024.
- The Topgolf business will consist of the company’s existing Topgolf business, with the exception of Toptracer. Topgolf generated revenue of approximately $1.8 billion in the past 12 months through Q2 2024. Brewer said, Topgolf’s “strategic priorities’’ will remain to: (1) drive profitable same venue sales
- The split will give shareholders an opportunity to basically decide which stock they like best – Callaway or Topgolf. In other words, you don’t have to own Callaway Golf if you want to own Topgolf. Currently the two are joined at the hip.
- The split could help Wall Street, which has never embraced Topgolf, to better evaluate each company separately in terms of growth value.
- Callaway will continue to be led by Brewer; Topgolf will continue to be led by Artie Starrs, its chief executive officer.
- The companies will enter into ongoing, value-creating commercial agreements with one another. As an example, Callaway will continue to be the exclusive golf equipment partner for Topgolf.
Topgolf, according to Brewer, will be “well-capitalized,’’ with a significant cash balance and no financial debt, positioning the company to continue to capture its long-term growth opportunity.- Topgolf Callaway Brands intends to spin off at least 80.1 percent of Topgolf to obtain the desired tax-free treatment of the spin-off for U.S. federal income tax purposes and will also consider retaining a limited ownership in Topgolf for a period of time. In connection with the separation, Callaway is expected to retain all existing Topgolf Callaway Brands financial debt, including the term loan and the convertible notes.
- Topgolf will retain its venue financing obligations, but will have no financial debt, and be funded with a “significant cash balance.’’
- Topgolf intends to reduce its new venue development plans for 2025 to a number in the mid-single digit range.
Will the split – however it takes place – change Wall Street’s mind on Topgolf? And if so, could it be at the expense of Callaway Golf? The markets, as always, will eventually determine the winners and losers.