Topgolf Callaway is announcing a multiyear agreement with Golf Saudi to bring Topgolf Callaway brands to Saudi Arabia.
The deal, which was announced in a press release issued at 3:00 AM Eastern Time today (10:00 AM Riyadh time), includes plans to build three Topgolf facilities in Saudi Arabia by 2023, with an option for two more in the future. Those venues will be owned and operated by Golf Saudi.
Additionally, Callaway, Odyssey, TravisMathew and Ogio will be the official equipment and apparel brands for the Saudi Men’s, Women’s and Junior National golf teams. Saudi Elite golf professionals and golf pros working at Golf Saudi facilities will also be sponsored by those brands.
Finally, Golf Saudi will be the official distributor of Callaway, Odyssey and Ogio products in Saudi Arabia.
What does this mean?
In the early morning press release, Ben Sharpe, the current Managing Director and President of Callaway’s EMEA division said:
“We’re excited to enter another market in the Middle East with three (Topgolf) venues in Saudi Arabia. We have found a strong partner in Golf Saudi to help us bring our modern golf brands…to the region and help transform Saudi Arabia into an exceptional golfing nation.”
The new comes on the heels of the announcement earlier this month that Topgolf Callaway plans to split into two separate companies as early as mid-2025. The plan is to spin off Topgolf into a separate entity, with current Topgolf Callaway stockholders getting equivalent shares in the new Topgolf, thus avoiding tax implications from an outright sale.
The split followed a less-than-stellar Q2 financial report that, while showing overall Topgolf sales growth, highlighted a fourth consecutive quarter of declining same-venue sales at Topgolf. That meant that Topgolf’s growth was being fueled only by new venues being opened, while quarterly sales at existing venues were going down.
Management announced in its Q2 report that the downward same-venue trend and unsatisfactory stock performance were prompting them to perform a “strategic review” of Topgolf. A month later, the company announced its intentions to split.
The Saudi connection
The Golf Saudi connection is the interesting part of the announcement. Golf Saudi is the action arm of the Saudi Golf Federation, which is an element of Saudi Arabia’s Vision 2030. Vision 2030 is a far-reaching government initiative to create a sustainable, diversified and – in their words – progressive economy and society that’s not dependent on oil.
A pillar of Vision 2030 is tourism, and a key element of the tourism pillar is golf. It’s why the Saudis started LIV, and it’s why the Saudi Golf Federation and Golf Saudi are promoting golf course construction in that country.
The reasoning is simple. Saudi Arabia wants to become a global business center. To do that, it needs global businesses to set up shop in the desert. To make that happen, the country needs to provide places to go, sights to see and things to do.
Golf is one of those things.
There are currently seven golf courses in Saudi Arabia, with plans for 14 more to open by 2030.
Also among Golf Saudi’s objectives:
- Develop a golf ecosystem to drive jobs, create businesses and increase revenue streams
- Connect golf tourism by driving interest in new properties and destinations
- Position golf via events that showcase Saudi as an innovative and progressive society
- Provide access to golf via entertainment-based entry-level golf initiatives.
The plan to build as many as five Topgolf facilities allows Golf Saudi to check at least three off that list.
Additionally, Golf Saudi is working to include golf in a national sports culture. Its goals include enrolling 500 kids per week into golf camps, creating 50,000 golf-related jobs and ensuring more than one million people at least try the game.
What does this mean for Topgolf Callaway?
In the short term, it’s an opportunity to partner with a well-funded, golf-centric entity. Topgolf Callaway joins companies such as Six Flags amusement parks, Hilton, Ritz-Carlton, Hyatt and other hotel chains as well as the Nicklaus golf design firm in partnering with the Saudis to invest in their country’s future.
If you’re of the mind to conclude the whole point behind LIV is “sportswashing,” you could probably conclude that it’s working. If instead you believe LIV is part of Saudi Arabia’s effort to globalize its economy and create the society Vision 2030 calls for, you can also conclude that it’s working.
In the big picture, the Topgolf Callaway-Golf Saudi partnership is a business coup for both Topgolf and Callaway, adding value to both entities. You’ll recall back in March a South Korean news agency reported that a Topgolf Callaway split was coming. The Chosun Daily said Topgolf Callaway’s three largest investors, who together owned 33 percent of the company’s shares, wanted out.
The plan as reported was to spin off the Topgolf business, which is happening, and then sell the Callaway golf and apparel business for approximately $3 billion.
According to the report, a South Korean investment company was the leading candidate to buy the Callaway business.
So far, the Chosun Daily report has been remarkably prescient. If Callaway is indeed on the trading block, today’s announcement adds another wrinkle, and possibly a potential suitor, to the mix.
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