Texas Capital positive on Topgolf deal, ‘disappointed’ by implied valuation

Commenting on Topgolf Callaway’s (MODG) announcement of a definitive agreement to sell a 60% stake in the Topgolf and Toptracer businesses to Leonard Green & Partners, L.P. at an implied valuation of approximately $1.1B, Texas Capital says the firm is positive on the proposed transaction as an avenue for the company to both monetize the Topgolf segment for existing shareholders, while still retaining an ownership stake and participation in the future growth of Topgolf. However, Texas Capital is disappointed by the implied valuation of $1.1B – not only due to the meaningful deterioration from the original $2.6B valuation when the company originally acquired Topgolf in March 2021, but also because it’s well below the implied $2.2B valuation for Topgolf that it included in its sum-of-the-parts analysis. The firm has a Buy rating on Topgolf Callaway with a price target of $12.