Callaway merging with Top Golf...

[pinestreetgolf]

15 hours ago, Fairway14 said:

 

Callaway issuing a press release stating the company will issue approximately 90 million shares is false, fake news?

* in my previous post I copied and pasted Callaway's press release.

 

Yes.  You can't match up the information.  You have no idea *when* they voted to issue those shares.  Its not "fake" so much as "misleading to people who don't deal with corporate finance a lot".  The classic move is to do this then split the stock, looks like you got it at half price to people doesn't know what is going on.

 

If they reserved those shares for an acquisition 12 months ago then you have no idea how much the shares were "worth" when they "issued" them into escrow or trust.

 

This doesn't even get into you thinking all stock is common stock.  It is likely warrant stock, which means you need four or five of these "shares" to make a common share.  Even "common stock" can come with what we call Covenants, which are contracts inherent to the stock.  So if I buy you with 90 million shares of common stock containing a two-year no-sell no-hedge Covenant(incredibly common) then they don't become common stock until 2023, and those shares worth a fraction of a share you'd buy on the Exchange.  You can also tie these Covenants to performance of the target, only allowing the seller to liquidate if certain targets are met, otherwise they can't sell.

Edited October 30, 2020 by pinestreetgolf

[tw_focus]

Lots of misinformation here. The press release is clear:

 

Quote

The number of shares issued is based upon an implied equity value of Topgolf of $1.986 billion⁶ (including Callaway's ownership position). The number of shares issued is also based upon a fixed price of Callaway common stock of $19.40 per share.
...

6 Implied equity value of $1.739 billion when accounting for the various preferential rights of Topgolf shareholders and excluding assumed stock options and Callaway's ownership position

 

Doing the math, about 89,639,000 new shares will be issued (Callaway rounds up in the press release, "approximately 90 million shares") to the non-Callaway equity holders of Topgolf in exchange for their stake.

 

The biggest concern I have is that Callaway mgmt has shown no talent to run a "golf nightclub" business (I would argue they have not shown any skill to run a golf equipment manufacturer business either...). It's not clear that the team who built and grew Topgolf will remain at their posts. I don't trust the folks running Callaway to successfully run and grow the Topgolf business.

 

I guess Callaway had to do something since their equipment brand has been dragged through the mud and is only getting worse.

[theebdk]

This is an interesting acquisition.  I appreciate that Callaway owned a slice of TopGolf for a while.  But equipment manufacturers typically owned equipment, accessory and apparel brands.  Callaway has branched out into entertainment and seizing the new golf player momentum. 

 

I wonder if we are going to see broader golf companies since golf is now clearly hot.  Will Acushnet feel the need to acquire for the sake of growth.  And would they move out of the traditional space? Will one of the manufacturers move into owning or managing golf courses?  Think about ClubCorp, Troon, and other club owners/managers that are currently owned by private equity.  Will these businesses stay separate or will there be more combinations that make for broader golf companies?

[Jc0]

On 10/31/2020 at 4:25 AM, theebdk said:

This is an interesting acquisition.  I appreciate that Callaway owned a slice of TopGolf for a while.  But equipment manufacturers typically owned equipment, accessory and apparel brands.  Callaway has branched out into entertainment and seizing the new golf player momentum. 

 

I wonder if we are going to see broader golf companies since golf is now clearly hot.  Will Acushnet feel the need to acquire for the sake of growth.  And would they move out of the traditional space? Will one of the manufacturers move into owning or managing golf courses?  Think about ClubCorp, Troon, and other club owners/managers that are currently owned by private equity.  Will these businesses stay separate or will there be more combinations that make for broader golf companies?

 

Golf is hot but there is no guarantee it continues when the pandemic is over. Top golf is currently not because of pandemic rules, but was expanding during regular times. My assumption here is that callaway picked up top golf at a discount because of everything that is going on and sees it as a safe source of income and marketing into the future. I don't think there is anything else in golf that would have the same type of safety on investment as top golf.

Edited November 3, 2020 by Jc0

[smashdn]

Good opportunity to continue to put your clubs and balls out there and get the guy/gal who went to TG and decided to try real golf to go, "I used those Callaway clubs at TG, I'll buy a set of those."

[Dr. Block]

On 10/31/2020 at 12:01 AM, tw_focus said:

Lots of misinformation here. The press release is clear:

 

 

Doing the math, about 89,639,000 new shares will be issued (Callaway rounds up in the press release, "approximately 90 million shares") to the non-Callaway equity holders of Topgolf in exchange for their stake.

 

The biggest concern I have is that Callaway mgmt has shown no talent to run a "golf nightclub" business (I would argue they have not shown any skill to run a golf equipment manufacturer business either...). It's not clear that the team who built and grew Topgolf will remain at their posts. I don't trust the folks running Callaway to successfully run and grow the Topgolf business.

 

I guess Callaway had to do something since their equipment brand has been dragged through the mud and is only getting worse.

 

I share your same worry, but I would predict that Callaway leaves all the Top Golf principles in place and gives them total autonomy. Top Golf is side-stepping a set back right now, but it doesn't change the strength of the brand. Callaway may not be the most impressively managed golf equipment company, but I think they have more business sense then to do anything to such a complete and strong brand. 

 

Also, I kind of feel like If Top Golf thought that was coming down the line, they wouldn't have made the deal. Any number of Private Equity firms would have jumped at the chance to help with any cash flow issues they are having right now. PE firms that understand the restaurant and entertainment businesses.  

Edited November 6, 2020 by Dr. Block

[ScottHutch2]

inside source (M&A advisor on the sellside): TG was struggling with debt, but Callaway had already been planning this move. COVID sped the timeline up. Callaway sees opportunity in the "Golf Entertainment" industry and this is the fastest way in. Do not be surprised to see "5iron" type indoor golf simulator bars popping up under TopGolf's name in the next year or two.

[Jc0]

12 hours ago, ScottHutch2 said:

inside source (M&A advisor on the sellside): TG was struggling with debt, but Callaway had already been planning this move. COVID sped the timeline up. Callaway sees opportunity in the "Golf Entertainment" industry and this is the fastest way in. Do not be surprised to see "5iron" type indoor golf simulator bars popping up under TopGolf's name in the next year or two.

 

 

They already exist. It's called top golf swing suite.

[LeoLeo99]

21 hours ago, smashdn said:

Good opportunity to continue to put your clubs and balls out there and get the guy/gal who went to TG and decided to try real golf to go, "I used those Callaway clubs at TG, I'll buy a set of those."

 

Maybe...  The clubs at TG are not anything you'd recognize as Callaway unless you recognized the Callaway rounded look on their XR irons and the like.  To a real golfer the clubs are TG resemble Callaway but to non-golfer, they wouldn't know.  The clubs at TG seem a little more robust than what you'd use on the course.  They need to stand up to a lot of abuse.  And you have a double edge of clubs breaking being tied to Callaway and giving them a bad name.  So, not sure Callaway wants their branded clubs in use at TG.  

[Fairway14]

I know people who have gone to a TopGolf once, but not twice. Bowling centers cultivate repeat customers by organizing and maintaining league play. Traditional golf driving range repeat customers are those players trying to improve their game.

Does TopGolf offer a compelling reason for a customer to return week after week ?

[Murphy76]

18 minutes ago, Fairway14 said:

I know people who have gone to a TopGolf once, but not twice. Bowling centers cultivate repeat customers by organizing and maintaining league play. Traditional golf driving range repeat customers are those players trying to improve their game.

Does TopGolf offer a compelling reason for a customer to return week after week ?

 

Fun? 

[smashdn]

On 11/7/2020 at 10:12 AM, LeoLeo99 said:

 

Maybe...  The clubs at TG are not anything you'd recognize as Callaway unless you recognized the Callaway rounded look on their XR irons and the like.  To a real golfer the clubs are TG resemble Callaway but to non-golfer, they wouldn't know.  The clubs at TG seem a little more robust than what you'd use on the course.  They need to stand up to a lot of abuse.  And you have a double edge of clubs breaking being tied to Callaway and giving them a bad name.  So, not sure Callaway wants their branded clubs in use at TG.  

 

The irons at the one in Nashville say callaway on them, I know as I had to track down a lefty, lady's set the last time I was there for tow ladies in our group.  The balls do not though.

[smashdn]

On 11/7/2020 at 11:13 AM, Fairway14 said:

I know people who have gone to a TopGolf once, but not twice. Bowling centers cultivate repeat customers by organizing and maintaining league play. Traditional golf driving range repeat customers are those players trying to improve their game.

Does TopGolf offer a compelling reason for a customer to return week after week ?

 

Not week after week.  But the social aspect of it is strong.  The first time I went it was a guys night.  The second time I went it was a professional networking event.

 

I was actually very surprised that I enjoyed it.  The food is upscale bar food.  The beer is cold.

 

I wouldn't go to work the kinks out of my wedge game but it is a fun diversion that is golf related and though it is golf related, non-golfers can still have fun.

[Dr. Block]

On 11/7/2020 at 11:13 AM, Fairway14 said:

I know people who have gone to a TopGolf once, but not twice. Bowling centers cultivate repeat customers by organizing and maintaining league play. Traditional golf driving range repeat customers are those players trying to improve their game.

Does TopGolf offer a compelling reason for a customer to return week after week ?

They do leagues at the Top Golf by me in Naperville, IL. I would assume they do them everywhere. I was there one evening and they had to move me out of my first floor bay because the entire floor was going to be in use for a weeknight league.  

Edited November 9, 2020 by Dr. Block

[Fairway14]

4 hours ago, Dr. Block said:

They do leagues at the Top Golf by me in Naperville, IL. I would assume they do them everywhere. I was there one evening and they had to move me out of my first floor bay because the entire floor was going to be in use for a weeknight league.  

 

Got it, thanks for the information.

[Dr. Block]

Looks like Top Golf has kicked off it's first tribute act: https://www.bigshotsgolf.com/