Last month, Malibu Boats announced it had entered an agreement to acquire Cobalt Boats, which officially closed on July 6. The agreement had been in the works since around the beginning of 2017 and the two companies moved quickly and efficiently through the due diligence process.
Cobalt offers a surf package with the Volvo Penta Forward Drive engine, and Malibu’s goal is to effectively own surfing in the sterndrive and inboard categories. This may include adding Surf Gate to Cobalt Boats down the line if it were to make sense.
We sat down with Malibu CEO Jack Springer and Cobalt President St. Clair, both of whom expressed great respect for one another and enthusiasm over the partnership, to discuss the purchase and the long-term growth plans for the two companies.
Boating Industry: Has Malibu been looking for several companies to acquire, and what made Cobalt so attractive from a product standpoint?
Springer: “We started around three or fours years ago really concentrating on looking at potential acquisitions and fits for Malibu. I would say in the neighborhood of 20 opportunities have come up over time and Cobalt obviously is the best of them all. I think Cobalt – for Malibu and certainly for many others – they’re the crème de la crème and just an incredible brand. … Secondly, I would say that for 50 years, Cobalt has delivered high-quality product, product that hit the market and kept customers coming back. That’s one thing that we have seen, is that the Cobalt customer’s granddad owned a Cobalt, their father owned a Cobalt and now they want to own a Cobalt. And so the quality and the product itself keeps them coming back.”
BI: Had Cobalt been looking for buyers, or was this the right opportunity at the right time?
St. Clair: “More so the latter, really. Over the years as a business, this is our 50th year, at times we’ve had people approach us. But this was more about our opportunities for growth and less about some kind of exit strategy. Pac [St. Clair] has always pushed us to take an unselfish approach to the business, as to what is best for all involved – the employees in Neodesha, all our dealers – what gives us the best opportunities for growth going forward? And so we looked at this and we’ve been watching what Malibu has done in the last six or eight years, and it’s obviously been very impressive. As we looked at our growth plan, we found that finding the right strategic partner like Malibu really could help us achieve growth goals and it becomes a ‘1 + 1 = 3’ scenario.”
BI: What do each of you think the synergies of these two companies will bring to each brand in the long term, from a product standpoint and a culture standpoint?
Springer: “First of all, the diversification of product is a great synergy, and it’s going to have two impacts. First, it’s going to give the customers a greater breadth and depth of product in more categories. One of the things that we believe in strongly, and I think we jointly believe in this, is you have to have great product and you have to have the right product. … I think secondly that it makes both companies stronger if and when a downturn comes. I would much rather be in a position of having Cobalt and Malibu together and going through a recession like 2008 than either one of us trying to do it independently.
From a culture standpoint, it’s really been remarkable how similar the cultures are. They are both built on integrity, they’re both built on delivering the best customer experience that we possibly can, and then ultimately I think that our people are extremely similar. In spending time here in Kansas here with the Cobalt people, they’re very much like our associates in Tennessee.”
St. Clair: “Our combined expertise makes both of our product lines better. Malibu does some incredible things. We like to believe we have a lot of expertise in areas. And so at the end of the day, it’s all about a better customer experience, and together we think we can deliver that to both the Malibu customer and the Cobalt customer. I am very excited from that standpoint and how this really gives us an advantage in the marketplace.”
BI: Paxson, can you discuss how your role will (or won’t) change with the acquisition and your involvement with the Malibu board?
St. Clair: “Jack has given me the opportunity to play a larger role in the sales and marketing portion of the business, which is the piece that I love, the product development piece as well. We have a very talented combined group in manufacturing and operations, which I will be a little less involved in. … and then on top of that Jack invited me to join the Malibu board, which is a big honor, it was a surprise and I’m certainly thankful and privileged to do that. Our employees, our dealers, they realize we will continue – business as usual is maybe not the right word, we’re going to get aggressive in the marketplace – but they clearly understand that we have their best interest at heart.”
BI: What is the long-term plan for Cobalt’s presence in Neodesha? How committed is Malibu to keeping the company in this town?
Springer: “We are committed to keeping Cobalt operations in Neodesha. I made that announcement [on July 18] to the employees and naturally they were excited.”
St. Clair: “It was a lot of fun. There were a lot of cheers when Jack announced that.”
Springer: “And I think that was the question on their minds, fairly. But if you look at it purely from a business standpoint and pull the emotion out of it, they build at Cobalt a great boat with exceptional people building that boat. In Tennessee, Malibu builds a great boat with exceptional people as well. The comment that I made is that it would really be almost business suicide to take that expertise that are building Cobalt Boats and move it somewhere else. They do it well, and what we hope over time is that, through growth, they have even more boats to build.”
BI: Does this agreement changes product offerings for dealers who sell Cobalt and non-Malibu tow boats? For instance, would Cobalt and those brands now be seen as competitors, as well as Malibu and other fiberglass sterndrive and outboard boats?
Springer: “No. We are taking a very bifurcated view of this, meaning that we want the absolute best dealer for Cobalt that is out there. And for Malibu, we want the absolute best dealer. It does not matter to us whether the Cobalt dealer carries another tow boat brand, or whether the Malibu dealer carries another sterndrive brand. Because ultimately, unless we’re not focused on each of the companies and having the best dealer for each of the companies, I think that we’re going to suffer.”
St. Clair: “This has been brought up a number of times by many of our dealers as this was announced through various conversations with those dealers. My answer has always been the same with those dealers. At Cobalt, our mission is to continue to build the very best dealer network in the business. That is what created our past success and we certainly know that’s what is going to create future growth and success. And so our mission will not change. We’re in pursuit of the very best dealers out there – best in sales, best in service – and that is the lifeblood of our success and Cobalt Boats, and I know Malibu as well. We’re blessed with a very long-term dealer network and a lot of very good dealers, and I would go so far as saying that’s one of the things that attracted Jack and his team to this business. Nothing’s going to change.”
Springer: “That said, if somewhere we don’t have a corresponding dealer on the Cobalt or Malibu side, if a dealer is interested in that and they come to us, we’ll certainly listen. But it’s not our goal, it’s not our objective and it shouldn’t be our mission to go out and try to convince those Cobalt dealers to carry Malibu.”
I was wondering what happened with the Marker One line of platform boats Cobalt was introducing. They appeared to be a very well engineered boat with excellent quality in a market needing that type of expertise.