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Callaway and Topgolf to merge

11.18pm 27th October 2020 - Corporate - This story was updated on Monday, November 16th, 2020

Callaway Golf is to take a controlling interest in driving range chain Topgolf Entertainment Group to provide the golf equipment company with a new source of growth.

Callaway first invested in Topgolf in 2006, and already owned 14% of Topgolf before it confirmed its intention to become a majority shareholder and merge the two companies. 

After the deal, which is expected to be completed early next year, Callaway shareholders will own 51.5% of the merged entity, while Topgolf shareholders, which include Providence Equity Partners, Fidelity Research and Management and Thomas Dundon, chairman of Dundon Capital Partners, will own the remaining 48.5%. 

Topgolf, which was founded in 2000, currently operates 63 locations around the world, serving more than 23 million customers in 2019, 50% of which identify themselves as ‘non-golfers’. 

Topgolf driving ranges – which feature food, drinks and games – are seen as a way to bring younger players to golf, which has suffered from aging demographics and the closing of hundreds of courses in recent years. They also have held up during the pandemic because golfers can practice their swing while remaining socially distant.

Topgolf generated $1.1 billion in revenues in 2019, with financial projections rising to $3.2 billion by 2022, and 10% annual growth thereafter. Under the terms of the merger agreement, Callaway will assume Topgolf’s net debt, which is estimated to be $555 million, resulting in an estimated enterprise value for Topgolf of approximately $2.5 billion.

Chip Brewer, President and CEO of Callaway, who will lead the combined companies, said: “Together, Callaway and Topgolf create an unrivalled golf and entertainment business. This combination unites proven leaders with a shared passion for delivering exceptional golf experiences for all – from elite touring professionals to new and aspiring entrants to the game. 

Topgolf runs three venues in the UK at Chigwell, Watford and Addlestone in Surrey

“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. Callaway’s strong financial profile will enable the combined company to accelerate innovation, develop exciting new products and experiences, and create compelling value for shareholders, while providing the dedicated teams of both companies more opportunities to showcase their talents and complementary capabilities.” 

Dolf Berle, Chief Executive Officer of Topgolf, said “We are excited to join the Callaway family and strengthen the experiences we create at the intersection of sports and tech-driven entertainment. Fuelled by a tremendous team of associates and a diverse offering across our venues, Toptracer, and media platform, Topgolf is truly changing the landscape of the industry by making golf more inclusive and accessible to people of all ages, demographics and skill levels. As part of Callaway, we plan to grow our leadership position by leveraging Callaway’s brand reputation, industry relationships and financial strength to connect more communities around the world to the Topgolf experience.”

Callaway president Chip Brewer will lead the combined company

Erik Anderson, executive chairman of Topgolf, added: “Since its inception, Topgolf has created an innovative, tech-inspired twist on the golf driving range experience, turning it into a global entertainment and sports movement. Our track record of creativity and diversity of offerings will only grow stronger as part of Callaway, a global leader in the industry. 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.”

Once the companies have merged the Board of Directors will consist of 13 directors, including three directors appointed by Topgolf shareholders. Chip Brewer will lead the combined company as President and CEO, while Dolf Berle, Topgolf’s current CEO will step down. John Lundgren will continue as chairman of the board of the combined company, while Erik Anderson will serve as vice chairman. Topgolf will continue to operate from its global headquarters in Dallas, Texas.

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