Action sports firm acquires Sugar Sand
TORRANCE, Calif. – Action sports company Execute Sports Inc. (OTCBB:EXCS) has purchased the Sugar Sand jet boat line from IMAR, Inc., a wholly owned subsidiary of Challenger Powerboats, Inc. (OTCBB:CPWB), for $5 million in cash, it reported in a statement today.
In conjunction with the transaction, Execute and Challenger entered into an agreement for exclusive right of supply, through which Challenger will manufacture and sell at wholesale Sugar Sand boats to Execute, and an exclusive sales and marketing agreement through which Challenger will market Sugar Sand boats on behalf of Execute. These agreements are for periods of 10 years each, with similar renewal terms. Sugar Sand generated $7.7 million in revenue on net sales of 381 boats in 2006.
“One of our main goals this year was to strengthen our balance without sacrificing top line growth,” said Challenger CEO Laurie Phillips in a separate statement. “The divestiture of Sugar Sands will enable us to eliminate approximately $5 million in liabilities and $300,000 in monthly debt servicing.”
Phillips added that its ancillary agreements with Execute Sports will allow Challenger to benefit from Sugar Sand boat sales, while retaining its other two lines of boats, the high performance Challenger boat line and the ski and tow boat Gekko line.
“We have been exploring growth through synergistic acquisitions over the last several months,” said Geno Apicella, CEO of Execute Sports. “The Sugar Sand purchase will expand our product offering without the added responsibilities of managing a manufacturing process or marketing effort. The supply and marketing agreements will enable us to benefit from Challenger’s operational expertise and existing sales network. This acquisition puts us on pace to approach approximately $10 million in sales for 2008. We will continue to search for other acquisition opportunities that are accretive to our P&L.”
Celest Berouty, Execute Sports’ president, added, “Entering into the jet boat industry is in line with Execute’s marine sports genre. Since our water sports products focus on the wake and ski markets, a direct extension of our involvement in this industry leads our expansion into one of the leading jet boat products available in the marketplace. In addition to the immediate accretion to our financial growth, we have significant cross-selling potential through a large and growing dealer network.”
Based in Torrance, California, Execute Sports, Inc. develops action sports products including wetsuits, vests, wakeskates and rash guards.
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