Bombardier To Sell Recreational Products Division

Sale to include Sea-Doo, Johnson and Evinrude
Two years ago, Bombardier rescued the Johnson and Evinrude brands from bankruptcy court. Now, the brands are a part of a larger sale that the company is using to prevent it from facing its own day in bankruptcy court.
Bombardier announced on April 3 that it is selling its Bombardier Recreational Products Division as part of a larger restructuring/refocus on the Quebec-based corporation.
The division includes Sea-Doo personal watercraft and jet boats, Ski-Doo and Lynx snowmobiles, Bombardier-brand ATV and the relatively newly acquired Johnson and Evinrude outboard engine division.
The move is being hastened by tough times in Bombardier’s major aerospace and transportation divisions. Bombardier President and CEO Paul M. Tellier said the planned sale of the Recreational Products Division is due to its success, not its failure.
“Anybody could ask, ‘Why are you selling that business unit,’” Tellier said during a teleconference announcing the restructuring. “Because it is the most liquid asset in our portfolio. And secondly, because we need the equity.”
The company said it plans to raise as much as $1.5 billion with the sale.
In the fiscal year that ended Jan. 31, 2003, Bombardier Recreational Products recorded sales of $2.5 billion, with earning before taxes totalling $138.4 million. That compares to companywide Bombardier sales of $23.7 billion that netted a $615.2 million loss.
Future of Rec Products Up In The Air
Even before the April 3 announcement, speculation about the future owners of Bombardier Recreational Products was causing a stir among powersports and marine industry analysts.
The list of possible suitors that floated through the rumor mill included Brunswick, Honda, Harley-Davidson, John Deere and Polaris Industries. But many of those same observers stated that Bombardier would have to be in dire straights to actually go through the rumored sale, because of the company’s heritage in recreational equipment.
Bombardier was founded when inventor J. Armand Bombardier started toying with ideas for over-the-snow travel in 1922, and many of the surviving members of the Bombardier family have held high position in the Recreational Products Division. With those same family members controlling a fair share of Bombardier stock, many said speculation about the future of Recreational Products was just that — speculation.
In fact, one Bombardier official we spoke with on April 2 said, “I never thought it could actually happen — until the last 24 hours. Now it seems like something is going to happen.” About 18 hours later, Tellier confirmed it.
The Bombardier family may still be a part of the division’s future, however. According to Bombardier’s press releases, “members of the Bombardier family have expressed an interest in participating in the process as part of an eventual group of investors seeking to acquire the recreational products business.”
Because the Bombardier Board Of Directors includes several members of the Bombardier family (including board chairman and former president Laurent Beaudoin, J. Armand Bombardier’s son-in-law), an independent committee was set up to monitor the sale.
In his April 3 address, Tellier stressed the sale will be an “open process to maximize the value to our shareholders.” Still, many speculate that the family will end up as leaders of whatever group buys Recreational Products.
What It Could All Mean
Certainly the planned sale of any person’s division would cause a bit of insecurity, but officials throughout Bombardier’s Recreation Products Division said employees largely took the news of the planned sale as good news.
In recent years, Bombardier has asked all of its divisions, including Recreational Products, to undergo cutbacks and layoffs as the larger company weathered the tough times in aerospace, transportation and defense systems.
Now, by not having to weather the ups and downs of these unrelated industries, the Recreational Products Division can live and die on its own, one official pointed out. And traditionally, the Recreational Products Division has been quite profitable, he added.
Meanwhile, Bombardier officials are plotting a future led by aerospace and transportation. The company plans to add $1.5 billion in capital with the sale of the Recreational Products Division and raise another $800 million through a new stock offering. Plus the company claims to have $44.4 billion in order for its planes, trains and other products.
“In spite of the current uncertainties, I am confident that the fundamentals of our core businesses are sound,” Tellier said. “We have good products, good people, loyal customers and good technology. We can also rely on a strong backlog of orders, which provides our manufacturing facilities with two to three years of work.”