Topgolf Callaway Brands to split into two independent companies

Topgolf Callaway Brands Corp. announced Wednesday that its board of directors intends to pursue the separation of its two primary businesses, Topgolf and Callaway, making them two independent companies.

In March 2021, Callaway Golf Co. acquired the remainder of Topgolf Entertainment Group that it didn’t already own, valuing the driving range chain at approximately $2 billion. The joint company was renamed Topgolf Callaway Brands Corp., but starting in March of this year, rumors began to swirl that a breakup could be coming.

In August, Topgolf Callaway reported that its second-quarter revenue was $494 million, while its first six months’ revenue exceeded $917 million. While those numbers represented increases, they came almost exclusively from the creation of new venues because the same-venue sales were down 8 percent. At the time, Topgolf Callaway reported that traffic to existing Topgolf locations slowed.

After that announcement, Topgolf Callaway CEO Chip Brewer said, “We remain convinced Topgolf is a high-quality business with significant future opportunity. At the same time, we have been disappointed in our stock performance for some time, as well as more recent same-venue sales performance.”

Topgolf Callaway Brands, which trades on the New York Stock Exchange under the symbol MODG, has seen its value steadily decrease since reaching a high of $36.92 per share in May 2021. On Aug. 30 it finished at a low of $9.94. On Wednesday it closed at $10.76 per share before the announcement was made.

In a release, John Lundgren, chairman of the board of directors of Topgolf Callaway Brands, said, “Today’s announcement is the result of a thorough strategic review conducted by the board of directors and the management team. The creation of two independent companies, each with a distinct focus and proven business model, is intended to drive continued momentum in both businesses and deliver value to all our shareholders.”

Callaway will consist of the golf equipment part of the business, along with Toptracer and lifestyle brands TravisMathew, OGIO and Jack Wolfskin.

Topgolf will concentrate solely on its entertainment business, which includes more than 100 driving range-entertainment centers worldwide. Topgolf plans to reduce its new venue development for 2025 to a number in the mid-single digits, the release stated.

Brewer said on Wednesday, “We believe that separating Topgolf will best position both companies for success. Topgolf and Callaway have different operating models and capital needs, and this split allows each to maximize their potential.”

The company announced that it expects to spin off of the Topgolf business to Topgolf Callaway Brands’ shareholders in a transaction that is intended to be tax-free to both the company and its shareholders for U.S. federal income tax purposes. While the company expects that a spin-off of Topgolf into a stand-alone public company is the most likely separation path, the company will continue to evaluate other options for separation to maximize shareholder value.

The separation of the brands is expected to be completed in the second half of 2025.