Callaway Golf completes acquisition of trendy Topgolf for $2.6 billion in stock

Callaway Golf wrapped up the all-stock acquisition of flashy driving-range outfit Topgolf International on Monday — adding entertainment venues credited with luring new players to the game to the Carlsbad company’s club, ball and apparel portfolio.

The deal, first announced in October, called for Callaway to issue about 90 million of its shares to Topgolf stockholders. The Carlsbad company was an early investor in Topgolf dating back to 2006. It already owned a 14 percent stake in the firm.

At the time, Callaway’s stock traded in the $19.40 range, valuing the piece of Topgolf that it didn’t already own at $2 billion.

But Callaway’s stock price has been rising since then. Based on Monday’s closing price of $29.52 per share, Callaway paid $2.66 billion to acquire the rest of Topgolf beyond its existing ownership.

Chief Executive Chip Brewer noted that the transformational combination “has already created and will continue to create meaningful shareholder value,” which seemingly was a reference to gains in the company’s share price since the acquisition was announced.

“Callaway and Topgolf are just better together,” said Brewer. “Callaway’s leadership in the global golf equipment market and geographic diversity, combined with Topgolf’s revolutionary technology platform and access to golfers of all abilities, will allow both companies to accelerate growth and create competitive advantages.”

With the acquisition complete, Callaway shareholders own 51.3 percent of the combined company and former Topgolf shareholders own 48.7 percent.

Topgolf operates about 60 venues in North America. Before COVID-19 restrictions, the company reported full-year revenue of $1.05 billion for 2019, according to filings with the U.S. Securities and Exchange Commission.

Topgolf had 23 million visitors to its venues that year, which is nearly as many as the 24 million golfers in the entire U.S., based on research from the National Golf Foundation. The company reportedly explored going public at a valuation as high as $4 billion, according to Bloomberg News.

But pandemic closures dampened its financial results. Through the first nine months of 2020, Topgolf’s revenue came in at just $485,500, according to the proxy statement for the Callaway transaction. That was down from $794,100 for the same period the prior year.

Topgolf has been looking to add several new venues in the U.S. In San Diego, the company has been talking with the Port of San Diego about possibly building a 68,000-square-foot flagship facility on a 7-acre site along East Harbor Drive. Those talks are in their early stages. The company has two sites in the Los Angeles area where it expects to open venues in 2022.

“Together with Callaway, Topgolf has the opportunity to build upon its rapid growth story, bring the Topgolf experience to new communities and advance our mission of making golf a more inclusive and accessible game,” said Erik Anderson, Topgolf’s executive chairman, in a statement.

Callaway posted full-year revenue of $1.6 billion, down slightly from the prior year. During the pandemic, golf rounds surged, particularly in the U.S., as the sport was considered a relatively safe outdoor activity. Apparel sales, however, declined amid lockdowns.

Callaway added three new members to its board of directors as part of the deal, bringing the total number of directors to 13. Brewer will lead the combined company as president and chief executive officer. Topgolf CEO Dolf Berle will remain through a transition period before stepping down. John Lundgren will remain chairman of the board, while Erik Anderson will serve as vice-chairman.

The combined company will be headquartered in Carlsbad, but Topgolf will continue to operate from its headquarters in Dallas.

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