Key Takeaways
- Shares of Topgolf Callaway rose in premarket trading Thursday, a day after the company announced its intention to separate into two companies just over three years after their merger was completed.
- The companies merged in March 2021, calling it a “highly complementary fit” at the time.
- Callaway now believes the investments it has made set Topgolf up for long-term growth, and sees the best way forward for Topgolf as a separate public company.
Shares of Topgolf Callaway Brands (MODG) rose about 5% in premarket trading Thursday, a day after announcing plans to split back into two separate companies just three years after their merger was completed.
Topgolf Callaway still is exploring options, but said after markets closed Wednesday that the most likely option is spinning off Topgolf from Callaway as an independent public company, likely in the second half of 2025. However, it said the separation isn’t guaranteed and the specifics could change.
Topgolf, Callaway Originally Called ‘Highly Complementary Fit’
The companies initially announced plans to merge in October 2020, and completed the merger in March 2021, calling it a “highly complementary fit” at the time. But on Wednesday, Topgolf Callaway Chief Executive Officer (CEO) Chip Brewer said that the “considerable investments” Callaway has made in Topgolf have improved the company’s scale and profitability, and the best path forward to allow Topgolf to continue growing would be as two separate companies.
“At the same time, Topgolf has a different operating model, capital structure and investment thesis than Callaway, and as a result, the Board has determined that separating Topgolf will best position Topgolf and Callaway for success and maximize shareholder value,” Brewer said.
In the most likely scenario, Topgolf would become its own public company sometime next year, with Callaway retaining a stake up to 19.9%, as it been an investor in Topgolf for nearly two decades. A separation likely would mean that Topgolf would slow its pace of building new venues in 2025 to mid-single digits to maintain a solid balance sheet during the transition period.
Topgolf Callaway shares rose 4.5% to $11.24 about 30 minutes before the opening bell Thursday. They were down about 25% on the year through Wednesday’s close.