Capitalizing on the synergies found in a $79.8 million transaction will be a critical task for MasterCraft as the company begins initial efforts to integrate NauticStar into its already diverse boating product portfolio.
NauticStar currently sells its boats in the United States through an established network of approximately 70 dealers.
In the calendar year ending in 2016, the company generated approximately $63.7 million in net sales and is expected to approach $80 million in net sales for the calendar year ending 2017.
“We are still working through our integration plans, which we plan to discuss in more detail Nov.9 ,” said Terry McNew, MasterCraft’s president and chief executive officer, referring to MasterCraft’s scheduled first quarter call next month. McNew was joined by CFO Tim Oxley Monday during a half-hour transaction discussion with industry analysts and trade press media earlier this week.
The combined MasterCraft-NauticStar organization will have the resources and experience to greatly expand NauticStar’s distribution both domestically and internationally after satisfying existing dealer network demand, McNew said.
“We look forward to working together to deliver profitable marketshare growth and drive efficiency in every area of our business, and expect NauticStar will contribute between 20 and 25 percent to combined company revenue in fiscal 2018," McNew said.
NauticStar’s year over year unit growth is among the strongest in the 18- to 28-foot category, which includes bay boats, deck boats and offshore center consoles, McNew said, adding domestic demand currently exceeds supply.
NauticStar’s wholesale growth is clearly a function of the company’s strong dealer network, he said. “They will operate as an autonomous unit. We will keep them in Amory, Miss. They have a nice footprint of skilled labor and we think its best to keep them there.”
Moving forward with the transaction, McNew said a key goal for MasterCraft will be removing some constraints to help NauticStar increase output.
“That’s going to be a primary focus during the quarter through the end of this calendar year,” he said. “Certainly, we believe through better process flow and lean Six Sigma, we’ll be able to concurrently evaluate whether we need to expand. They are a great brand and have a great dealer network.”
NauticStar Owner/Founder Phil Faulkner will have an emeritus role, McNew said. “We would very much like to see him help and participate at boat shows, dealer meetings and so forth," McNew said. “The rest of the senior staff will be coming over.”
Monday’s transaction was not solely based on putting NauticStar boats through MasterCraft dealers, McNew said.
“They are primarily an Eastern U.S. company, with distribution from the Atlantic to the Mississippi and the Canadian border down to the gulf. We have plans to expand the network west of the Mississippi, through Canada west to Australia, once we satisfy current dealer demand. We believe there’s a great opportunity to expand internationally. Our goal is not to run this through existing MasterCraft distribution. It is a unique product. There might be a couple of dealers there, but we respect dealer territory, and we respect the current territories at NauticStar.”
However, McNew did state during Monday’s conference call that MasterCraft has identified “incremental dealers” that will augment the current network. Outboard engines will remain 100 percent Yamaha.
“They [Yamaha] are excited about this transaction,” McNew said, further characterizing NauticStar as a mid-level product.
“They range over three distinct product lines, from bay, to deck boat, to salt water fish," he said. "It is important to note in the 18- to 28-foot category, NauticStar has one of the highest growth rates of any company in that segment. One of the things that was very important to us was to try and acquire a brand that was very complementary to MasterCraft.”
Production capacity constraints are most likely be emissions-related and involve NauticStar’s facility air permit, McNew said.
“We’re going with about a 15 to 20 percent increase in units without any increase in capital,” he said. ‘There’s a possibly to go another 25 to 30 percent with output above that,” McNew added.