TOPGOLF CALLAWAY BRANDS ANNOUNCES INTENT TO SEPARATE INTO TWO INDEPENDENT COMPANIES
Topgolf Callaway Brands Corp. (NYSE: MODG) has announced plans to separate into two independent companies: Callaway, a leader in golf equipment and active lifestyle products with $2.5 billion in revenue, and Topgolf, a high-growth golf entertainment business with $1.8 billion in revenue. The separation, expected to be completed in the second half of 2025, aims to create two focused entities with distinct investment opportunities and capital allocation strategies.
The company intends to spin off at least 80.1% of Topgolf to shareholders in a tax-free transaction. Callaway will retain all existing financial debt, while Topgolf will have no financial debt and a significant cash balance. Both companies are expected to generate positive free cash flow and maintain strong market positions.
Topgolf Callaway Brands Corp. (NYSE: MODG) ha annunciato piani per separarsi in due aziende indipendenti: Callaway, un leader nel campo dell'attrezzatura da golf e dei prodotti per uno stile di vita attivo con un fatturato di 2,5 miliardi di dollari, e Topgolf, un'azienda in rapida crescita nel settore dell'intrattenimento golfistico con un fatturato di 1,8 miliardi di dollari. La separazione, prevista per la seconda metà del 2025, mira a creare due entità focalizzate con opportunità di investimento distinte e strategie di allocazione del capitale.
L'azienda intende scorporare almeno l'80,1% di Topgolf agli azionisti in una transazione senza tassazione. Callaway manterrà tutto il debito finanziario esistente, mentre Topgolf non avrà debiti finanziari e disporrà di un saldo di cassa significativo. Si prevede che entrambe le società genereranno flussi di cassa liberi positivi e manterranno solide posizioni di mercato.
Topgolf Callaway Brands Corp. (NYSE: MODG) ha anunciado planes para separarse en dos empresas independientes: Callaway, un líder en equipos de golf y productos para un estilo de vida activo con ingresos de 2.5 mil millones de dólares, y Topgolf, un negocio de entretenimiento golfístico de alto crecimiento con ingresos de 1.8 mil millones de dólares. Se espera que la separación se complete en la segunda mitad de 2025 y tiene como objetivo crear dos entidades enfocadas con oportunidades de inversión y estrategias de asignación de capital distintas.
La empresa tiene la intención de escindir al menos el 80.1% de Topgolf a los accionistas en una transacción libre de impuestos. Callaway retendrá toda la deuda financiera existente, mientras que Topgolf no tendrá deuda financiera y contará con un saldo de efectivo significativo. Se espera que ambas empresas generen flujo de efectivo libre positivo y mantengan posiciones de mercado sólidas.
탑골프 캐러웨이 브랜드Corp. (NYSE: MODG)는 두 개의 독립 회사로 분리할 계획을 발표했습니다: 캐러웨이, 25억 달러 매출을 기록한 골프 장비 및 액티브 라이프스타일 제품의 리더, 그리고 탑골프, 18억 달러 매출을 자랑하는 고성장 골프 엔터테인먼트 사업입니다. 이번 분리는 2025년 하반기 완료될 예정이며, 두 개의 집중적이고 구별되는 투자 기회와 자본 배분 전략을 가진 회사를 만드는 것을 목표로 하고 있습니다.
회사는 탑골프의 최소 80.1%를 주주에게 세금 없는 거래로 분할할 계획입니다. 캐러웨이는 모든 기존 재무 부채를 유지하고, 탑골프는 재무 부채가 없으며 상당한 현금 잔액을 보유하게 됩니다. 두 회사 모두 긍정적인 자유 현금 흐름을 창출하고 강력한 시장 위치를 유지할 것으로 예상됩니다.
Topgolf Callaway Brands Corp. (NYSE: MODG) a annoncé des plans pour se séparer en deux entreprises indépendantes : Callaway, un leader dans le domaine de l'équipement de golf et des produits de mode de vie actif avec un chiffre d'affaires de 2,5 milliards de dollars, et Topgolf, une entreprise de divertissement golfique à forte croissance avec un chiffre d'affaires de 1,8 milliard de dollars. La séparation, prévue pour la deuxième moitié de 2025, vise à créer deux entités concentrées avec des opportunités d'investissement distinctes et des stratégies d'allocation de capital.
L'entreprise envisage de scinder au moins 80,1 % de Topgolf à ses actionnaires dans une transaction exonérée d'impôt. Callaway conservera toutes les dettes financières existantes, tandis que Topgolf n'aura aucune dette financière et disposera d'un solde d'argent significatif. Les deux entreprises devraient générer un flux de trésorerie libre positif et maintenir des positions de marché solides.
Topgolf Callaway Brands Corp. (NYSE: MODG) hat Pläne angekündigt, in zwei unabhängige Unternehmen zu separieren: Callaway, ein führendes Unternehmen im Bereich Golfausrüstung und aktiver Lifestyle-Produkte mit einem Umsatz von 2,5 Milliarden Dollar, und Topgolf, ein schnell wachsendes Golfunterhaltungsunternehmen mit einem Umsatz von 1,8 Milliarden Dollar. Die Trennung, die voraussichtlich in der zweiten Hälfte von 2025 abgeschlossen sein wird, zielt darauf ab, zwei fokussierte Einheiten mit unterschiedlichen Investitionsmöglichkeiten und Strategien zur Kapitalallokation zu schaffen.
Das Unternehmen beabsichtigt, mindestens 80,1 % von Topgolf in einer steuerfreien Transaktion an die Aktionäre abzuspalten. Callaway wird alle bestehenden finanziellen Verbindlichkeiten behalten, während Topgolf keine finanziellen Verbindlichkeiten haben und über einen erheblichen Bargeldbestand verfügen wird. Es wird erwartet, dass beide Unternehmen einen positiven freien Cashflow generieren und starke Marktpositionen beibehalten.
- Creation of two focused companies with strong market positions
- Tax-free spin-off of Topgolf to shareholders
- Both companies expected to generate positive free cash flow
- Callaway maintains #1 U.S. market position in golf clubs
- Topgolf to have no financial debt and significant cash balance
- Potential for improved execution and organizational agility
- Reduction in Topgolf's new venue development plans for 2025
- Potential for dis-synergies as a result of the separation
- Uncertainty regarding final terms and timing of the separation
This strategic separation marks a significant shift for Topgolf Callaway Brands, potentially unlocking value for shareholders. The creation of two distinct entities - Callaway (golf equipment and active lifestyle) and Topgolf (venue-based golf entertainment) - allows each to focus on its core strengths and growth strategies.
Callaway, with
Topgolf, generating
The tax-free spin-off structure and retention of existing debt by Callaway should benefit shareholders. However, investors should monitor the execution risks associated with the separation and potential market reactions to each standalone entity.
This separation reflects a growing trend of conglomerates streamlining operations to enhance shareholder value. By creating two focused entities, Topgolf Callaway Brands aims to address the "conglomerate discount" often applied by the market.
The move could attract different investor profiles: Callaway may appeal to value investors seeking stable returns, while Topgolf could attract growth-oriented investors. This separation also allows for more targeted marketing and branding strategies, potentially strengthening both businesses' market positions.
The reduction in Topgolf's 2025 venue development plans to mid-single digits is noteworthy. While this may temper short-term growth expectations, it demonstrates a balanced approach to growth and profitability, which could resonate well with investors concerned about cash burn in high-growth companies.
The ongoing commercial agreements between the two entities, such as Callaway remaining Topgolf's exclusive equipment partner, should help maintain synergies post-separation.
The proposed spin-off structure aims to be tax-free for both the company and shareholders, which is a significant benefit. However, this is contingent on meeting specific IRS requirements, including the distribution of at least
The company's cautious approach, stating they will "continue to evaluate other options for separation," suggests flexibility in structuring the deal to maximize shareholder value while navigating regulatory hurdles. This prudent stance mitigates potential legal and tax risks.
Investors should note that the separation is subject to various conditions, including regulatory approvals and final board authorization. The planned execution in the second half of 2025 provides ample time for due diligence and regulatory review, reducing execution risk.
The retention of all existing financial debt by Callaway, while Topgolf retains only venue financing obligations, presents a clear delineation of liabilities. This structure could simplify the separation process and provide clarity for investors assessing each entity's financial health post-spin-off.
Separation Will Create a Leading Golf Equipment and Active Lifestyle Company with Strong Free Cash Flow and the Category Leading, High-Growth, Pure-Play Venue-Based Golf Entertainment Business
Both Businesses Will Have Strong Balance Sheets, Positive Free Cash Flow and the Required Scale to be Leaders in Their Respective Markets
"Over the last decade plus, we have transformed Callaway into the #1 brand in golf equipment, while building a successful and complementary apparel and accessory business. We believe this business, on a stand-alone basis, will be well understood and valued by the market. Since our merger with Topgolf, we have made considerable investments in the Topgolf business that have dramatically expanded its scale, digital capabilities and venue profitability. These investments, combined with the hard work of the Topgolf team, have allowed us to outperform our original growth and free cash flow expectations. Looking forward, we remain convinced that Topgolf is a high-quality, free cash flow generating business with a significant future value creation opportunity. Topgolf is transforming the game of golf and is expected to deliver substantial financial returns over time. 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," commented Chip Brewer, President and Chief Executive Officer of Topgolf Callaway Brands.
"Today's announcement is the result of a thorough strategic review conducted by the Board of Directors and the management team," said John Lundgren, Chairman of the Board of Directors of Topgolf Callaway Brands. "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."
STRATEGIC RATIONALE
Following this strategic review, the Company has determined that Callaway and Topgolf will be better served operating independently from each other. The Company believes that creating two companies will result in material benefits to the stand-alone businesses that will maximize shareholder value, including:
- Enhanced Strategic Focus: This transaction will create two strong, focused operating companies with industry-leading market positions and a greater ability to align incentives with performance and shareholder value creation.
- Optimized Capital Allocation: Callaway and Topgolf have different free cash flow profiles and funding needs. The separation will position both businesses to implement appropriate capital investment, while maintaining an appropriate level of leverage.
- Simplified Operating Structure: Simplifying the operating structure of both businesses will improve execution and organizational agility.
- Distinct Investment Thesis for Each Entity: As separate businesses, Callaway and Topgolf will represent different and compelling investment opportunities. Investors will have the opportunity to support and invest in each business on the basis of its distinct qualities, including its growth drivers, financial profile and capital allocation framework. Furthermore, the separation of Callaway and Topgolf will simplify financial reporting for investors.
CREATING TWO STRONG COMPANIES
Callaway
Callaway will consist of the Company's existing Golf Equipment, Toptracer and Active Lifestyle businesses. These businesses generated revenue of approximately
Topgolf
The Topgolf business will consist of the Company's existing Topgolf business, with the exception of Toptracer, which will be part of Callaway. With revenue of approximately
Capital Structure and Ongoing Commercial Agreements
The Company intends to spin off at least
In connection with the separation, the two companies are also expected to enter into ongoing, value-creating commercial agreements with one another. As an example, Callaway will continue to be the exclusive golf equipment partner for Topgolf.
The Company expects limited dis-synergies as a result of the separation.
Experienced and Proven Leadership
Callaway will continue to be led by Chip Brewer, Chief Executive Officer, and Topgolf will continue to be led by Artie Starrs, Chief Executive Officer of Topgolf.
NEXT STEPS
Management is developing detailed separation plans for further consideration and final approval by the Company's Board of Directors. While the Company expects that a spin-off of Topgolf into a stand-alone public company is the most likely separation path, the Company will continue to evaluate other options for separation to maximize shareholder value.
The Company expects to execute the spin-off of Topgolf in the second half of 2025, but there can be no assurance regarding the ultimate timing or terms of the separation or that the separation will ultimately occur. The Company may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change its terms, including the individual businesses and components of each of the two companies. During this period, further work on structure, management, governance and other matters will take place. The Company will provide interim updates as appropriate. Throughout the process, management will remain focused on delivering strong business results, returning Topgolf to same venue sales growth and increasing profits.
"Our employees' dedication and hard work has enabled us to take this next step in the Company's evolution," said Chip Brewer. "Our Callaway and Topgolf businesses both employ very talented and dynamic people. I am confident that we will maintain the commitment to excellence that has been key to our success." He continued, "The focus and other benefits that come from creating two independent companies is expected to provide even greater opportunities for our employees and our brands."
Any transaction will be subject to general market conditions and other customary conditions, including receipt of regulatory approvals, an opinion from tax counsel and/or a private letter ruling from the Internal Revenue Service regarding the tax-free status of the spin-off of the Topgolf business to the Company and its shareholders for
The Company's financial advisors are Goldman Sachs and Centerview Partners with Latham & Watkins LLP serving as legal counsel.
ADDITIONAL INFORMATION AND DISCLOSURES
Conference Call and Webcast
The Company will be holding a conference call at 2:45 PM, Pacific Time, September 4, 2024, to discuss the planned separation. The call will be webcast live on our investor relations website. A replay of the conference call will be available approximately two hours after the call ends. The replay may be accessed through the Investor Relations section of the Company's website.
Forward-Looking Statements
Statements used in this press release that relate to future plans, events, financial results, performance, prospects, or growth opportunities, including statements relating to the Company's intended separation of the Topgolf business, the timing, terms and method of the separation and the ownership percentage of Topgolf that the Company intends to spin off, the anticipated benefits and other effects of the separation, the expected financial and operating performance of, and future opportunities for, each company following the separation, the tax treatment of the transaction, the expected capital structures of, and commercial agreements between, the companies following the separation, the expectation that Callaway will be the exclusive golf equipment partner for Topgolf following the separation, Topgolf's new venue development plans, and the leadership of each company following the separation, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "estimate," "could," "would," "will," "should," "intend," "may," "plan," "seek," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance. These statements are based upon current information and expectations. Accurately estimating the forward-looking statements is based upon various risks and unknowns, including the final approval of the separation by the Company's Board of Directors; the uncertainty of obtaining regulatory approvals in connection with the separation, including rulings from the Internal Revenue Service; the ability to satisfy the necessary closing conditions to complete the separation on a timely basis, or at all; the Company's ability to successfully separate the two companies and realize the anticipated benefits of the separation; potential negative effects of the announcement or pendency of the transaction on the market price of the Company's securities and/or on the financial performance of the Company; the possibility of disruption, including changes to existing business relationships, disputes, litigation, or unanticipated costs in connection with the transaction; uncertainty regarding global economic conditions, including relating to inflation, decreases in consumer demand and spending, and any severe or prolonged economic downturn; the Company's level of indebtedness; continued availability of credit facilities and liquidity and ability to comply with applicable debt covenants; effectiveness of capital allocation and cost/expense reduction efforts; continued brand momentum and product success; growth in the direct-to-consumer and e-commerce channels; ability to realize the benefits of the continued investments in the Company's business; consumer acceptance of and demand for the Company's and its subsidiaries' products and services; any changes in
About Topgolf Callaway Brands
Topgolf Callaway Brands Corp. (NYSE: MODG) is an unrivaled tech-enabled Modern Golf and active lifestyle company delivering leading golf equipment, apparel, and entertainment, with a portfolio of global brands including Topgolf, Callaway Golf, TravisMathew, Toptracer, Odyssey, OGIO, Jack Wolfskin, and World Golf Tour ("WGT"). "Modern Golf" is the dynamic and inclusive ecosystem that includes both on-course and off-course golf. For more information, please visit https://www.topgolfcallawaybrands.com.
Investor Contact
Katina Metzidakis
invrelations@tcbrands.com
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SOURCE Topgolf Callaway Brands Corp.
FAQ
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