Callaway and Topgolf — what’s next?

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Callaway Golf’s (NYSE: ELY) purchase of Topgolf International, Inc. has been completed, paid for with the issuance of 90 million additional shares of stock valued at less than $1.8 billion the time of the announcement last October and not counting the 14% of Topgolf Callaway already owned.

With Callaway now trading at over $30 per share the deal value jumped to approximately $2.7 billion.

Callaway shareholders own 51.3% of the post-deal company while former Topgolf shareholders have the balance, and the 13-member board of directors with three appointed by Topgolf shareholders. Callaway CEO Chip Brewer retains the top spot as President and CEO.

In 2019, the last reported year, Topgolf posted $1.1 billion in sales with fewer locations than at present and sales in the covid-effected year of 2020 for Callaway were $1.5 billion.

The key question is how does this purchase, or merger if you prefer, effect the future of Callaway as a major equipment company and Topgolf as the largest golf-themed entertainment company with more than 60 locations?

The most obvious would be cross promotion adding fan interest to Topgolf events by making use of Callaway’s endorsers from the PGA, LPGA and European Tours. Topgolf, with the help of fan favorites such as Phil Mickelson, Jon Rahm and Michelle Wie, could sell Callaway clubs, balls, and apparel to their customers, roughly 23 million in 2019 though that number is surely higher now. Callaway already provides the stock clubs in the Topgolf hitting bays.

There could be Topgolf tie-ins as well with Callaway’s other brands Odyssey (putters), Ogio (bags) and apparel makers TravisMathew and Jack Wolfskin. Topgolf’s Toptracer and Swing Suite might also be candidates for further engagement with golfers and nongolfers using Callaway equipment.

Callaway’s net revenue already was able to fund what is perhaps the largest research budget in the industry and the potential for being able to apply more cash generated by the combined operations is certainly a possibility. Also, since Topgolf’s golf entertainment venues are to a large degree real estate driven, with their track record and Callaway’s profitability lenders should be standing in line to finance new locations making it likely we will see new venues opening at a quicker pace. Eight additional Topgolf locations have been announced for 2021.

Thinking of the equipment business, the possibility of Callaway purchasing a smaller company is a reasonable expectation and makes for intriguing speculation. It is worth noting KPS Capital Partners is reported to be selling TaylorMade Golf with an asking price in the neighborhood of $2 billion. Such an acquisition is not out of the question.

Much hinges on the economic rebound continuing and further growth of on-course players. Given those positives Callaway equipment and apparel sales should be strong as will the number of visitors to Topgolf generating increased revenues. Off-course increases could also help sell more equipment for Callaway.

The combined company will be very interesting to watch for the next few years.


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Ed Travis

Ed Travis is a national award winning golf journalist and has had a life long love affair with the game. He has competed in tournament golf both as an amateur and as a senior professional and though his competitive days are behind him he still plays regularly and carries a handicap of 2. He and his wife live in suburban Orlando.