Topgolf Callaway Brands Corp. announced its plan to split into two independent companies, separating its golf equipment and active lifestyle business from its venue-based golf entertainment business.
The company's shares surged 12.3% following the announcement of the intended separation into Callaway, with approximately $2.5 billion in revenue, and Topgolf, with approximately $1.8 billion in revenue, both through Q2 2024.
The proposed separation will be executed through a tax-free spin-off of the Topgolf business to shareholders. The company is considering the spin-off as the most likely option but will keep evaluating other potential methods to ensure maximum value for shareholders.
The decision to split follows a strategic review by the company's Board of Directors and management.
Chip Brewer, President and CEO of Topgolf Callaway Brands, highlighted the transformation of Callaway into a leading brand in golf equipment and the successful expansion of Topgolf, which has exceeded growth and free cash flow expectations. The separation aims to position both entities for success and enhance shareholder value by allowing Topgolf to focus on its high-growth entertainment business and Callaway on its core golf equipment and active lifestyle segments.
John Lundgren, Chairman of the Board of Directors, emphasized that the creation of two focused companies is designed to continue momentum and deliver shareholder value. The strategic rationale behind the separation includes enhanced focus, optimized capital allocation, simplified operations, and distinct investment theses for each business, which will allow investors to engage with each company based on its unique growth drivers and financial profiles.
Post-separation, Callaway will encompass the Golf Equipment, Toptracer, and Active Lifestyle businesses, aiming to generate significant free cash flow and return capital to shareholders.
Topgolf will focus on its entertainment venues, excluding Toptracer, working towards profitable sales growth and new venue development, while being well-capitalized with no financial debt to seize long-term growth opportunities.