Brunswick acquiring Power Products

[twistedtree]

I'm surprised this hasn't come up already, but Brunswick is acquiring Power Products, including BEP, Anchor, MasterVolt, Marinco, ProMariner, etc.


Brunswick - Investor Relations - News Release


They paid quite a premium of about 4x trailing revenue (about $1B purchase (cash) on $250M revenue).


There certainly is a lot of consolidation going on in the industry, but it's not at all clear whether it's beneficial for the companies and their customers.


Thoughts?

 

[sunchaser]

TT
Would you guess this be more a move towards the RV, solar and wind generation markets as compared to marine?

 

[DDW]

Hope they don't ruin them. Anchor and Mastervolt in particular, make pretty good products. Anchor went slightly downhill years ago when acquired by Marinco.

 

[Keysdisease]

The consolidation of the Industry mirrors other Industries, just look at Hardware and Auto Parts Stores.
Just like the "transom wars" back when OMC and Mercury (Brunswick) were buying up Boat manufacturers, now instead of "buying" their market to secure sales the focus is on vertical integration. Brunswick bought Land n Sea Distributors to provide control of aftermarket distribution, and just like Yamaha's recent purchase of Bennett Trim Tabs, Brunswick is securing more product for it's supply chain. Instead of profits going to Power Products all the profits end up in the Brunswick account while controlling quality and ensuring Brunswick priority supply.

If it's profitable, with added benefits and you're a cash rich company, acquisitions like this make sense.

And I believe you will see more consolidation between the RV Industry and Marine, they share much technology and have similar markets. See the recent purchase of Chris Craft by Winnebago

 

[BandB]

While others see all sorts of evil here and think none of Brunswick's competitors will then continue to use these products, I see it at this point as an insignificant move which may be slightly positive or slightly negative depending on Brunswick's willingness to spend on the acquired products.

Understand some of this naturally comes out of Brunswick's reorganization plans with the boating companies separated from fitness and other. Now, that means the boating companies need some logical diversification and these products fit right in. I would call it "logical diversification" where the added products or companies make sense and have a connection to your core business but also added revenue streams. Great to have products you use in boats but that also have many other markets in which they're used.

 

[DDW]

Whether it's good or bad depends entirely on the parent company. There have been cases where it was absolutely positive, like Flir's purchase of Raymarine. There have been cases of disaster, such as Simrad's purchase of Navico (the original one). There are some where the jury is still out, like Garmin's purchase of Navionics and DeLorme.

 

[Comodave]

Well how did Brunswicks acquisition of Sea Ray go?

 

[BandB]

Well how did Brunswicks acquisition of Sea Ray go?

Extremely well, when you analyze it versus their purpose which was to sell engines and motors. It allowed Mercruiser to dominate the sale of stern drives up until the days stern drives started losing market share rapidly. Their acquisition of Bayliner protected Mercury and gave them a key market share. You look at those and others and it led to the destruction of OMC/Genmar. Those purchases paid off long ago. Their purchase of Sea Ray in 1986 long ago paid for itself many times over.

This acquisition is for a totally different purpose.

 

[Comodave]

Why can’t they find anyone to buy the money loosing Sea Ray?

 

[BandB]

Why can’t they find anyone to buy the money loosing Sea Ray?

Because:

1-Stern drives have died
2-They had it saddled with sport yachts and yachts and unneeded manufacturing.
3-The EU tariffs on boats eat into their sales and profits.

Solution:

1-Eliminate sport yachts and yachts and close facilities again.
2-Switch emphasis to outboards and no longer leave that to just Bayliner.
3-Adjust organization to lower volume and try to achieve profitability.
4-Then either keep it or try to sell it again.

Current line has 15 stern drives, 8 outboards. Most of the outboards are the same basic boats as the stern drives, not designed initially as outboards. Expect to see a shift for 2019, but the big shift on the 2020 line where outboards will likely outnumber stern drives.

Success for them at this point will be break even, sell motors and engines, and build into a more desirable entity for potential buyers.