Jana Builds Stake in Callaway and Plans to Push for Sale

(Bloomberg) -- Activist investor Jana Partners has built a stake in Callaway Golf Co. and is urging the sporting goods company to launch a strategic review, including exploring a potential sale.

The New York-based hedge fund run by Barry Rosenstein said in a regulatory filing Thursday that it bought 9.5% of Callaway Golf because it believes the shares are undervalued. Jana plans to hold discussions with management about ways to improve its performance, including selling all or part of the company.

Callaway Golf, with a market value of about $1.7 billion, rose as much as 16.4% on the news and traded up 14.1% at 2:24 p.m. in New York Thursday, its largest gain since 2018. The shares had fallen about 21% in the past year through Wednesday’s close.

While Callaway Golf doesn’t comment on individual investors, its board and management are open to dialogue with all shareholders, spokesman Scott Goryl said.

Jana has partnered with several consumer industry executives in the investment, including former Jarden Corp. Chief Executive Officer James Lillie, former Nike Inc. executive Cynthia Davis, and Roger Farah, former vice chairman at Ralph Lauren Corp., according to the filing.

Callaway Golf, based in Carlsbad, California, makes clubs, balls, gear and apparel under the brands Callaway, Odyssey and TravisMathew, according to an investor presentation in March.

Initially focused on making clubs, the company has expanded in golf-related clothing and accessories through acquisitions under Chief Executive Officer Oliver "Chip" Brewer. In January it closed a $476 million acquisition of outdoor clothing brand Jack Wolfskin. In 2017, it bought the brands TravisMathew and OGIO International Inc.

In May, the company said it was lowering its revenue guidance for Jack Wolfskin.

Possible Outcomes

Jana will likely focus on divesting Jack Wolfskin because it is the "primary factor" weighing on the company’s valuation, Steven Zaccone, an analyst with JPMorgan Chase & Co., said in research note Thursday.

Jana could also push Callaway Golf to monetize its stake in Topgolf International Inc., though that is less likely, Zaccone said. Its stake in the sports entertainment company could be worth about $420 million, he said.

Board changes are a "high probability outcome," Zaccone said, given Davis’s past experience as president of Nike Golf. Brewer will probably keep his job as CEO, he said.

Jana has a long history in the consumer space, having taken stakes in Tiffany & Co., Whole Foods Market Inc. and others.

The firm said in January it planned to liquidate two of its flagship funds as it shifted its focus to activism and investments focused on social and environmental issues. As a result, Jana sold stakes in more than 21 companies in the first quarter, valued at about $815 million.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Matthew Monks

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