Calloway Topgolf Spin-off Notes

September 10, 2024 Notes

On September 4, 2024, Topgolf Callaway (MODG), announced that it plans to separate into two public companies: “Callaway, a leader in golf equipment with a highly complementary Active Lifestyle business, with last twelve months revenue through Q2 2024 of approximately $2.5 billion (including Toptracer); and Topgolf, a category leading, high-growth, pure-play venue-based golf entertainment business, with last twelve months revenue through Q2 2024 of approximately $1.8 billion (excluding Toptracer).”

Sell side analysts seem to believe the spin-off will unlock value, but I’m not so sure. MODG‘s best peer, Acushnet (GOLF) trades at 2.1x LTM revenue. Assuming Callaway trades at the same revenue multiple, it will be worth an enterprise value of $5.25BN. MODG‘s current EV according to Koyfin is $6BN, implying that Topgolf is worth ~$800MM. This might not be the wrong valuation given Topgolf’s struggles and capex requirements.

The transaction will be tax free and is expected to be completed by Q4 2025. I will continue to dig in, but this situation doesn’t appear to be immediately actionable.