Name: Topgolf is merging with Callaway in a deal valued at $2 billion
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Topgolf is merging with Callaway in a deal valued at $2 billion

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3:38 PM on Oct 27, 2020 CDTDallas-based Topgolf Entertainment Group is merging with publicly traded golf brand Callaway in an all-stock transaction that values the golf entertainment business at $2 billion.The deal, announced Tuesday, creates a company that can draw in non-golfers to Topgolf’s entertainment venues and expose them to the broader game, said Callaway CEO Chip Brewer, whose company sells golf clubs, balls, apparel and other equipment.Topgolf generated $1.1 billion in revenue last year at 63 locations that drew more than 23 million customers. And it has plans or letters of intent to build another 33 facilities and designs on growing outside the United States through franchising.More than half of Topgolf’s customers identify themselves as non-golfers, giving Callaway early exposure to potential golfers. The venues include golf driving bays that use its ball-tracing technology to make games out of the experience, along with food, music and golf retail. Topgolf’s ball-tracing technology is seen on televised golf broadcasts and its mobile golf game, World Golf Tour, boasts 28 million members.Both CEOs said golf equipment and golf entertainment venues have a chance to excel in the COVID-19 environment while other forms of entertainment have been severely restricted.“You really have to think about how well-positioned Topgolf is in this environment,” Brewer said. “It’s an outdoor venue that actually has barriers up between bays ... and a group of people can be completely socially distanced in an outdoor environment.”Topgolf’s venue revenue has now rebounded to about 85% of pre-pandemic levels and all of the company’s locations have reopened.Carlsbad, Calif.-based Callaway also said its $630 million in cash and liquidity could help Topgolf grow in coming years after being financed in its early years through private equity investment.“In the next 10 years, we think that we can double the size of the business and add another 8,000 bays,” said Topgolf CEO Dolf Berle.Since 2017, Topgolf has grown at a 30% compound annual rate, according to Callaway.“Topgolf is very much in a high-growth phase right now,” Brewer said.While golf has struggled in recent years with courses closing across the country, the pandemic has actually been a boon as more corporate employees work from home, along with the outdoor atmosphere golfing provides.“The Callaway golf business, and the game of golf itself is experiencing unprecedented growth,” Brewer said.The deal ends a 20-year journey as a private company for Topgolf, a concept that started in the United Kingdom to create a new experience in a golf game that’s struggled in recent years. Topgolf garnered an investment from Callaway in 2006 and expanded to the United States, now the primary market for the company.Remaining privately-owned during those two decades, the company built locations in every region of the country. Topgolf began looking at an initial public offering in 2019.In that time, Topgolf’s value grew to equal that of Callaway, a dominant name in golf equipment and apparel. With the deal, Callaway shareholders will own a 51.5% stake in the company with the rest owned by Topgolf’s investors.Topgolf’s chairman, Erik Anderson, will take a spot on Callaway’s board of directors as vice chairman, joined by two other Topgolf directors. Berle will leave after a transition period and Topgolf will continue to operate from its Dallas headquarters.Apart from Callaway’s previous 14% share in the golf-entertainment business, Topgolf also had major ownership stakes from Providence Equity Partners, WestRiver Group and Dundon Capital Partners, the Dallas-based investment arm of .Callaway projects the combined company’s revenue will be $2.8 billion, based on fiscal year 2019 results. It expects that to grow to $3.2 billion by 2022 and at a 10% rate after that.Callaway’s reach in the golf world also gives Topgolf an inside track on selling its ball-tracing technology to courses and driving ranges, Berle said.Callaway announced the deal along with its third-quarter financial results, noting 12% year-over-year revenue growth to $476 million.After the merger, Callaway said its golf equipment will account for 30% of revenue and its apparel 24%, while Topgolf will represent 46% of revenue.As part of the agreement, Callaway will issue 90 million shares of its common stock to Topgolf shareholders. That doesn’t include Callaway’s previous ownership stake. Callaway also will assume Topgolf’s debt, which is estimated to be $555 million at closing.The deal is expected to close in early 2021.Become a business insider. Get the latest headlines delivered to your inbox every weekday.By signing up you agree to our

3:38 PM on Oct 27, 2020 CDTDallas-based Topgolf Entertainment Group is merging with publicly traded golf brand Callaway in an all-stock transaction that values the golf entertainment business at $2 billion.The deal, announced Tuesday, creates a company that can draw in non-golfers to Topgolf’s entertainment venues and expose them to the broader game, said Callaway CEO Chip Brewer, whose company sells golf clubs, balls, apparel and other equipment.Topgolf generated $1.1 billion in revenue last year at 63 locations that drew more than 23 million customers. And it has plans or letters of...

Topgolf is merging with Callaway in a deal valued at $2 billion

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