(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 14.9% on the news and traded up 13.5% at 10:04 a.m. in New York Thursday, its largest gain since 2018. The shares had fallen about 21% in the past year through Wednesday’s close.
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 golf 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. It closed a $476 million acquisition in January 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.
Steven Zaccone, an analyst with JPMorgan Chase & Co., said cutting that guidance in the first full quarter of owning the brand will continue the "show me" narrative for investors debating the merits of the acquisition, according to a note to clients on May 10.
After meeting with management, Zaccone said he was "incrementally more comfortable" with the guidance given for the unit in light of the macro weather issues in Central Europe and China. The lower forecast was not an indication of the underlying brand weakness, he said.
Jana has a long history in the consumer space, having taken stakes in Tiffany & Co., Whole Foods Market Inc. and others.
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