Topgolf to merge with golf equipment maker Callaway

The all-stock merger creates a multi-branded golf powerhouse and gives Topgolf a valuation of nearly $2.5 billion.
TopGolf x Callaway
Photograph: Shutterstock

Topgolf, the fast-growing food-and-golf concept, will merge with the golf products maker Callaway in an all-stock transaction that values the chain at $2.5 billion, the companies announced on Tuesday.

The unusual combination brings together an eatertainment concept with an equipment company in a deal designed to accelerate the growth of both brands.

Callaway already owns 14% of Topgolf. Shareholders of the chain, other than Callaway, will receive 90 million shares of Topgolf, giving the chain an implied equity value of $1.986 billion. Topgolf ownership includes investment firms Providence Equity Partners, WestRiver Group and Dundon Capital Partners.

Callaway will assume Topgolf’s debt of about $555 million, giving the chain an estimated enterprise value of $2.5 billion.

The combined company is expected to generate $3.2 billion in annual revenues by 2022 and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $360 million.

“Our track record of creativity and diversity of offerings will only grow stronger as part of Callaway, a global leader in the industry,” Erik Anderson, executive chairman of Topgolf, said in a statement. “All of us are looking forward to building new experiences, reaching new audiences and solidifying our digital infrastructure as we connect communities around the globe.”

Dolf Berle, Topgolf’s CEO, said the company expects to grow “by leveraging Callaway’s brand reputation, industry relationships and financial strength to connect more communities around the world to the Topgolf experience.”

Callaway’s “strong financial position” is expected to help fund Topgolf’s expansion needs for the coming years at a lower cost than the chain could fund on its own.

Callaway first invested in Topgolf in 2006, and the companies have had an exclusive golf partnership agreement at all of the chain’s venues. Topgolf has grown substantially since its founding in 2000. The company has expanded to 63 locations across the globe, and more than half of its customers say they are not golfers.

That is what interests Callaway, which views the chain as a way to get at people who don’t otherwise know the brand. “Topgolf is introducing new players to the game of golf, a powerful trend that benefits Callaway’s golf equipment and soft goods businesses,” the companies said.

“We’ve long seen the value in Topgolf and we are confident that together, we can create a larger, higher growth, technology-enabled global golf and entertainment leader,” Chip Brewer, Callaway’s CEO, said in a statement.

In addition to its venues, Topgolf uses Toptracer, a ball-tracing technology known for its use in televised golf. The technology is being sold to driving ranges and revenues from that segment have more than tripled over the past three years. Topgolf also has a mobile golf game called World Golf Tour with 28 million members.

Topgolf is expected to make up 46% of the revenues for the combined companies, and both Callaway and Topgolf have “recovered ahead of expectations” following the pandemic. Brewer will lead the combined company as CEO. Berle will lead Topgolf through a transition period following the close of the deal, after which he plans to step down. Topgolf will continue to operate from its Dallas headquarters. The deal is expected to close early next year.

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