MINNEAPOLIS, Minn. and LAKE FOREST, Ill. – Boat building giant Brunswick Corp. (NYSE:BC) looks to become even bigger with the signing of an agreement to acquire three of Genmar’s aluminum boat brands for about $191 million in cash, plus an additional $30 million potential earn-out.
“The goal of the Brunswick Boat Group is to offer our dealers a full line of products in all major powerboat segments,” said Brunswick Boat Group President Dustan E. McCoy in a company statement today. “Currently, we do not participate in the aluminum segment in any meaningful way in the United States. The addition of these quality brands represents a significant step in our effort to ‘fill the white spaces’ in our product line-up and to offer dealers a full range of products to meet their customers’ particular boating needs.”
The acquisition of the Lund, Crestliner and Lowe brands shouldn’t be a big surprise to anyone, according to McCoy.
“It’s important to note that these acquisitions are nothing more than a continuation of a strategy we’ve been articulating for three years,” he said in an interview today.
That strategy is to provide a full line of products and services to the marketplace and to use its size to focus on providing better products, faster, at a lower cost, he explained.
Genmar to focus on fiberglass
Meanwhile, Genmar is turning its focus toward “the future development and expansion of Genmar’s 13 remaining fiberglass boat companies,” said Genmar Chairman Irwin L. Jacobs in a statement today.
The combination of this sale, expected to be complete later this month, and the spinoff of its VEC technology into a separate company will mean “Genmar will basically have minimal long-term debt and over $100 million in cash,” said Jacobs.
“With Genmar’s balance sheet in the strongest financial condition it has ever been, we will have the opportunity to accelerate our implementation of VEC and VEC Shield patented boat building processes throughout our factories and product line,” he explained.
Impact on dealers, boat building firms
Brunswick will continue to operate the three brands under the direction of current leadership, McCoy said in an interview today. In addition, Brunswick is not expecting to relocate or consolidate the brands’ manufacturing facilities, he stated.
“We are pleased there is manufacturing capacity in certain facilities,” he said. For those that are nearing capacity, Brunswick will do “whatever it takes” to keep the brands on a growth path, he added.
Meanwhile, the brands’ dealers will experience “absolutely no difference” as a result of the acquisition in the near-term, according to McCoy.
“As we go forward, we are very open about our plans to envelop the dealers in goods and services from Brunswick,” he stated.
Despite this, he said Brunswick recognizes that a lot of these dealers carry other brands.
“We’re not at all envisioning asking them to make changes,” he said. “It’s important to us that the existing dealers continue to sell those brands the way they’ve been doing.”
While in the long term Brunswick expects the acquisitions will lead to market share growth for Mercury Marine’s outboard business, it will continue to offer competitive engine product through existing dealers.
Brunswick to remain nimble?
While some would imagine Brunswick’s recent growth would make it harder for the company to react to changing market conditions, McCoy said that’s not the case.
“In fact, I believe [those companies] in our portfolio are better able to react to market conditions [because of Brunswick’s] financial strength and expertise in boat building, selling and marketing,” he explained. “As long as we keep the brands close to the dealers and the customers, [we will] be more responsive rather than less.”
McCoy said that the brands currently serve as the face of the company to the consumers and the dealers, while Brunswick offers infrastructure processes and systems that increase efficiency, reduce costs and permit better integration of its products.
The agreement covers the purchase of Crestliner, Inc., based in Little Falls, Minn.; Lowe Boats, Inc., based in Lebanon, Mo.; Lund Boats, Inc., of New York Mills, Minn., and Genmar Boats Canada, Inc., which produces the Lund brand in Canada, of Steinbach, Manitoba, according to Brunswick. Each of these companies produces numerous models of aluminum fishing, pontoon, deck and utility boats ranging from 10 to 25 feet. Combined, these entities had sales of approximately $311 million in the year ended June 30, 2003.
The company reported that on an annualized basis, these businesses would add approximately $0.14 per diluted share to the company’s earnings. However, how much of that Brunswick would realize in 2004, however, will depend on when the acquisition is closed. Brunswick said it expects to complete the transaction by the beginning of the second quarter.
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— Liz Walz