Malibu Boats to acquire Cobalt Boats

Cobalt has experienced great growth in its Surf Series.

Malibu Boats, Inc. (NASDAQ: MBUU)  announced that it has entered into a definitive agreement to acquire Cobalt Boats, LLC, a privately held, leading manufacturer and distributor of premium sterndrive and outboard boats for an aggregate purchase price of $130 million, subject to customary adjustments for the amount of working capital in the business at the closing date and subject to adjustment for any judgment or settlement in connection with a pending litigation matter between Cobalt and Sea Ray Boats, Inc. and Brunswick Corporation.

Founded in 1968, Cobalt manufactures and sells water sport boats, cruisers, bowriders and outboard boats for cruising, skiing, entertainment, surfing, fishing and other recreational uses on lakes, rivers, intercoastal waterways and oceans. Cobalt has a product portfolio of twenty-four models across six proprietary series. Cobalt sells its boats through a dealer network of 132 locations in the United States, Canada and overseas. For the last 12 months ended March 31, 2017, Cobalt generated approximately $140 million in net sales.

"It is hard to know where to start, given how positive we are about this opportunity. We are excited at the prospect of combining two iconic brands with extensive dealer networks, leading market shares and strong product innovation. We are very excited about bringing Cobalt, its proven management and experienced employees into the Malibu family. Cobalt is a well-recognized market leader and world-class brand with a rich history of delivering performance, innovation and uncompromising quality. In addition, the St. Clair family is known for their passion and integrity and this has been proven and re-proven throughout this process," said Malibu's Chief Executive Officer Jack Springer. "This acquisition is consistent with our disciplined, long-term growth strategy, and we believe it provides us with an immediate leadership position in a key segment of the recreational boating industry, while allowing us to diversify our product offering and tap into an exceptionally strong dealer network to accelerate Malibu's growth and profitability.

“The addition of Cobalt will expand our distribution footprint and allow us to grow both brands across the combined dealer network presenting both customer bases with an array of product offerings,” he added. “The addition of Cobalt will also provide us with a number of vertical integration and market opportunities that we believe will create significant value for our stakeholders."

"This is an outstanding opportunity for Cobalt, our employees, and our dealer network. As our focus has always been on the long-term success of the company, Malibu brings us a new level of opportunity through accelerated growth and brand awareness,” said Cobalt's Chief Executive Officer Paxson St. Clair. “I look forward to working with the Malibu team and continuing our legacy of market leadership."

Transaction overview

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Following the completion of the transaction, Malibu, with its headquarters in Loudon, Tenn., will maintain a presence in Neodesha, Ks., Cobalt's headquarters.  St. Clair will continue to lead the Cobalt business as its president, and he will become a director on Malibu's Board of Directors, subject to and effective upon completion of the transaction.

Malibu expects that by the end of the fourth year of operations after the completion of the transaction, the combined business will achieve a run rate of approximately $7.5 million in cost and operational synergies. These synergies will be primarily derived from identified opportunities in product management, operating efficiencies and vertical integration opportunities.

The transaction is expected to be accretive to Malibu's earnings per share in fiscal year 2018, excluding purchase accounting adjustments and acquisition costs. In connection with the transaction, Malibu expects to benefit from tax attributes valued on a present value basis at approximately $18 million.

The transaction is expected to close in early July, subject to customary closing conditions. Malibu will fund the transaction through borrowings under a new second amended and restated credit facility.

Moelis & Company LLC is acting as Malibu's financial advisor and O'Melveny & Myers LLP is acting as Malibu's legal counsel. Raymond James & Associates, Inc. is acting as Cobalt's financial advisor and Foulston Siefkin LLP is acting as Cobalt's legal counsel.

Call and webcast information

Malibu Boats, Inc. hosted a conference call and webcast on June 29, 2017 at 8:30 a.m. Eastern time to further discuss the Cobalt acquisition. The call was hosted by Jack Springer, chief executive officer; Wayne Wilson, chief financial officer; and Ritchie Anderson, chief operating officer. A slide presentation and link to the webcast is posted on the Malibu Investor Relations website at investors.malibuboats.com. A replay of the webcast will archived on the company's website for twelve months.

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