Topgolf Callaway Brands Corp. has announced plans to separate its two main businesses, Topgolf and Callaway, into two independent companies. The decision follows a strategic review by the board of directors and management team, aiming to unlock further value for shareholders by allowing each business to focus on its distinct strengths and opportunities.
Callaway Golf Co. originally acquired the remaining shares of Topgolf Entertainment Group in March 2021, valuing the driving range and entertainment chain at approximately $2 billion. The combined entity was renamed Topgolf Callaway Brands Corp. However, speculation about a potential split began circulating earlier this year, as the company faced challenges in its stock performance and same-venue sales at Topgolf locations.
In August, Topgolf Callaway reported second-quarter revenue of $494 million, with first-half revenue surpassing $917 million. Despite these increases, growth came primarily from the opening of new venues, while same-venue sales dropped by 8%. The company acknowledged a slowdown in traffic at existing Topgolf locations, leading to concerns about future growth.
Chip Brewer, CEO of Topgolf Callaway Brands, expressed confidence in Topgolf's potential but recognised the need for a strategic shift. "We remain convinced Topgolf is a high-quality business with significant future opportunity. At the same time, we have been disappointed in our stock performance for some time, as well as more recent same-venue sales performance," Brewer said.
Topgolf Callaway, which trades on the New York Stock Exchange under the symbol MODG, has seen its share price decline since reaching a high of $36.92 in May 2021. By the end of August, it had dropped to $9.94, recovering slightly to $10.76 per share before the separation announcement.
John Lundgren, chairman of the board of directors, commented on the decision: "Today’s announcement is the result of a thorough strategic review conducted by the board of directors and the management team. The creation of two independent companies, each with a distinct focus and proven business model, is intended to drive continued momentum in both businesses and deliver value to all our shareholders."
Following the split, Callaway will focus on its core golf equipment business, along with the Toptracer technology and lifestyle brands such as TravisMathew, OGIO, and Jack Wolfskin.
Meanwhile, Topgolf will concentrate on its entertainment business, which currently operates over 100 driving range-entertainment centres worldwide. As part of its new strategy, Topgolf plans to reduce the development of new venues in 2025 to a more moderate pace.
Brewer added, "We believe that separating Topgolf will best position both companies for success. Topgolf and Callaway have different operating models and capital needs, and this split allows each to maximise their potential."
The company intends to spin off the Topgolf business to Topgolf Callaway Brands’ shareholders, aiming for a tax-free transaction under U.S. federal income tax regulations. Although the spin-off into a stand-alone public company is currently the most likely path, other options will be explored to ensure the best outcome for shareholders.
The separation of the two brands is expected to be finalised in the second half of 2025.