Callaway Golf Close to Buying the Rest of Topgolf

Callaway Golf is discussing acquiring the Topgolf shares it doesn't already own at a company valuation of more than $2 billion, a report says.
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Callaway Golf  (ELY) - Get Report is reportedly close to an agreement to acquire the shares of driving-range operator Topgolf Entertainment Group that it doesn't already hold, a media report says.

Shares of Callaway, the Carlsbad, Calif., golf-equipment producer, at last check were up 2.8% to $20.45.

The companies are discussing a deal that would value closely held Topgolf at more than $2 billion, The Wall Street Journal reported.

Callaway has a market value of about $2 billion and already owns a roughly 14% stake in Topgolf, the Journal reported.

An agreement could be finalized this week. the paper reported.

Topgolf, Dallas, operates about 60 entertainment centers in the U.S. and elsewhere that offer virtual golf-related games and lessons and host private parties.

The company, whose investors also include the Providence, R.I., private-equity firm Providence Equity Partners, had been mulling going public, the paper reported.

Topgolf's outdoor driving ranges have been popular during the coronavirus pandemic as people look for ways to safely socialize outside their homes. 

Callaway said on its most recent earnings call in August that it expected covid-19 to hurt its sales through next year. 

The company said demand for equipment and apparel has been recovering more quickly than expected partly because golf enables social distancing.

Neither Callaway nor Topgolf immediately responded to requests for comment.

Last month, Moody’s upgraded Topgolf’s debt ratings to reflect improved liquidity due to $100 million of additional preferred equity with a commitment for another $80 million in preferred equity by year's end.

The company's lenders also amended their credit agreements to give the company relief from certain covenants, and a small shareholder loan was converted to preferred equity.

While Topgolf will continue to be hurt by covid-19 and leverage is expected to increase further in the near term, Moody's said, the enhanced liquidity will better position the company to manage through the pandemic, Moody's said.