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The maker of Callaway golf clubs has agreed to sell a majority stake in its Topgolf subsidiary to Leonard Green Partners at a $1.1bn valuation, a figure just half of what it paid for the upscale driving range operator five years ago.
Topgolf Callaway Brands said it would receive $770mn in net proceeds for selling 60 per cent of Topgolf, which the company said it would use to reduce a heavy debt load and buy back shares.
The sale on Tuesday also includes Callaway’s Toptracer unit, a well-known golf ball tracking technology separate from the driving range business.
Callaway had been a longtime minority investor in Topgolf, but in 2020 struck a $2bn all-stock deal to acquire the privately held company outright when golf boomed during the pandemic. The company changed its name to Topgolf Callaway Brands to demonstrate that it was a broad-based business for both serious and casual golfers that spanned equipment, apparel and experiences.
However, the transaction pulled the manufacturing company into the property and hospitality industry. Topgolf, which has about 100 facilities across the US, generated much of its revenue from food and beverage sales.
The heavy cost of building driving ranges proved challenging when interest rates leapt in 2022 and traffic significantly weakened at Topgolf locations with competition arriving from other similar golf and leisure formats.
In recent years, quarterly like-for-like sales have consistently fallen at Topgolf locations by 10 per cent. Callaway announced last year it was planning to spin off Topgolf as a standalone public company and return to its roots in traditional golf equipment.
Shares in the combined group have fallen 70 per cent from a multiyear peak in 2021, even as its Callaway golf club and ball business had delivered solid results. Topgolf Callaway’s market capitalisation stands at about $2bn.
Callaway’s chief rival, Acushnet, which makes the Titleist and FootJoy brands, has seen its share price double in the past five years.
“After a robust process and a thorough evaluation of a range of alternatives, we believe this sale is the best outcome for our shareholders, as well as our employees and other stakeholders,” Topgolf Callaway chief executive Chip Brewer said, citing the cash proceeds from the Topgolf sale as well as the chance to participate in any future upside.
The Financial Times reported in 2024 that Leonard Green had accumulated a 3 per cent stake in Topgolf Callaway Brands. The Los Angeles-based firm, whose leadership began their careers at Michael Milken’s Drexel Burnham Lambert, manages $75bn and has been an investor in the likes of Shake Shack and Petco.
The idea for Topgolf was developed in the late 1990s by British brothers Steve and Dave Jolliffe, who embedded microchips into golf balls to track their flight. “British driving ranges are just muddy fields. We wanted to make the experience better,” Steve Jolliffe told the FT in 2016.
The technology was later commercialised into Topgolf after investments from WestRiver Group, Providence Equity and Callaway.
