Topgolf Callaway Brands Corp. (NYSE: MODG) has announced its intention to separate its business into two independent companies: Callaway, a leader in golf equipment with last twelve months revenue through Q2 2024 of approximately $2.5 billion (including Toptracer), and Topgolf, a high-growth, pure-play venue-based golf entertainment business with last twelve months revenue through Q2 2024 of approximately $1.8 billion (excluding Toptracer). The separation is expected to create a leading golf equipment and active lifestyle company and a category-leading golf entertainment business, both with strong balance sheets and positive free cash flow.
The company expects to effect the separation through a tax-free spin-off of the Topgolf business to Topgolf Callaway Brands’ shareholders. This decision comes after a strategic review conducted by the board of directors and the management team, which determined that Callaway and Topgolf will be better served operating independently from each other.
Callaway, which will consist of the company’s existing golf equipment, Toptracer, and active lifestyle businesses, generated revenue of approximately $2.5 billion for the last twelve months through Q2 2024. It maintains the #1 U.S. market position in golf clubs and a growing #2 position in golf ball. On the other hand, Topgolf's business, with the exception of Toptracer, will be part of Callaway. With revenue of approximately $1.8 billion in the last twelve months through Q2 2024, Topgolf will continue to be the category-leading, pure-play venue-based golf entertainment company, with over 100 U.S. and international venues.
Topgolf will be well-capitalized, with a significant cash balance and no financial debt, positioning the company to continue capturing its long-term growth opportunity. The company intends to spin off at least 80.1% 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.
The company expects to execute the spin-off of Topgolf in the second half of 2025, with the two companies entering into ongoing, value-creating commercial agreements with one another. Callaway will continue to be led by Chip Brewer, chief executive officer, and Topgolf will continue to be led by Artie Starrs, chief executive officer of Topgolf.
The company’s financial advisors are Goldman Sachs and Centerview Partners with Latham & Watkins LLP serving as legal counsel. The company will hold a conference call to discuss the planned separation, and forward-looking statements used in the press release relate to future plans, financial results, prospects, and growth opportunities, including the intended separation of the Topgolf business and the expected financial and operating performance of each company following the separation. Today the company's shares have moved 4.3% to a price of $10.76. For the full picture, make sure to review Topgolf Callaway Brands's 8-K report.
