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By Jim Nugent
It was the coronavirus that finally brought Callaway Golf and Topgolf to the altar.
After years of “what-if” conversations, Callaway and Topgolf announced an all-stock combination last week, one that caught most in the golf industry by surprise. Callaway shareholders will own 51.5 percent of the new entity, while Topgolf shareholders will own 48.5 percent. Callaway CEO Chip Brewer, who has served on the board of directors of Topgolf since 2012, will continue to serve as the president and chief executive officer of the combined entity.
TopGolf had been rumored to be considering a 2020 initial public offering before COVID-19 happened. As recently as mid-summer, reports circulated that an alternative route was being pursued, with a valuation of Topgolf coming in at around $4 billion. In the end, the Topgolf board decided it was best to merge with Callaway, which already owned 14 percent of the enterprise. The deal valued Topgolf’s entertainment empire at $2 billion; Callaway Golf was valued at $2 billion just before the announcement of the transaction.
Brewer told GGP he made the first move, reaching out to Topgolf in April. Conversations heated up in the months that followed, informed to a certain degree by the extraordinary surge in golf participation globally.
“Transformational” was a word that he used repeatedly in a call with financial analysts immediately after the deal was made public.
“This is an epic opportunity to transform both companies,” he told GGP.
Callaway Golf is a different company today compared to what it looked like when Brewer became CEO in 2012. At that time, it was a golf club and golf ball manufacturer – one that was losing money.
Its diversification effort began in January 2017 when it acquired Ogio, which makes golf bags and travel gear. That August it acquired golf apparel maker Travis Matthew. In January 2019 the company acquired European apparel maker Jack Wolfskin. According to a company document, Callaway’s revenue split going forward will be 30 percent from golf equipment, 24 percent from apparel and 46 percent from Topgolf.
Click here for links to a company-prepared overview and to a news release of the merger.