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The Deal: PE-Backed PBH Marine May Be Poised for IPO

Stocks in this article: BC MPX WMAR HZO

NEW YORK (The Deal) -- Platinum Equity's collection of recreational and fishing boatmakers acquired out of bankruptcy almost four years ago, now referred to as PBH Marine Group, may be poised for an initial public offering in the coming year as the boating industry continues to sail out of the recession.

A more efficient supply chain, alongside increasing demand and a steady outlook, are all in PBH Marine's favor, BMO Capital Markets analyst Gerrick Johnson said.

"Private equity groups like PBH have generated economies of scale and scope by combining some facilities," Johnson said in a phone interview. "The industry is much more profitable than it was four years ago. You would probably guess that you'd see more companies [like PBH] go public. It seems perfect from both sides."

Jimmy Baker, a B. Riley & Co. analyst, also thinks an IPO is possible and would benefit the entire boating industry by drawing more investors into the space.

"PBH may have enough scale to go public," Baker said, pointing to its legacy fishing boat brands -- Ranger, Stratos, Champion and Triton -- and its recent entry into the jet boat market through its Scarab brand.

"The leisure group is very much in favor," he added. "It's a very low interest rate environment and there's attractive financing should [PBH] choose to go the route of monetizing in public markets."

Baker pointed to the high valuations others in the space have been attracting. Lake Forest, Ill., boatmaker Brunswick Corp. (BC), for instance, had a price-to-earnings multiple of about 38.26 on Nov. 3. Its shares, listed on the New York Stock Exchange as BC, have advanced about 53% this year, to $44.55 as of Tuesday's close.

While industry observers seem to think PBH Marine is well positioned today, that wasn't the case four years ago. Due to the economic downturn's impact on consumer spending, especially on leisure goods such as boats, the company then known as Genmar Holdings Inc. -- one of the nation's largest boatbuilding companies -- filed for Chapter 11 on June 1, 2009, after the debtor was unable to secure financing sources.

Former Genmar CEO and founder Irwin Jacobs, who earned the nickname "Irv the Liquidator" because of his raider days in the late 1970s and 1980s, initially planned to reorganize the company. Plans shifted to a sale, and on Nov. 30, 2009, Platinum Equity was chosen as the stalking-horse bidder.

The Beverly Hills, Calif., private equity firm ultimately won, on Jan. 13 with a $70 million bid, a majority of the boatmaker's assets, including the Ranger, Stratos, Champion, Wellcraft, Four Winns and Glastron boat brands. Also included in deal were manufacturing facilities and operations in Flippin, Ark.; Cadillac, Mich.; and Murfreesboro, Tenn.

Minneapolis-based J&D Acquisitions, controlled by Irwin Jacobs and Jean-Paul Dejoria, acquired the assets associated with Genmar's yacht brands, Carver and Marquis, for $6.5 million.

MCBC Hydra Boats, a subsidiary of Wayzata Investment Partners, which owns performance boat manufacturer MasterCraft Boat, bought Genmar's Hydra-Sport brand for $1 million.

When Genmar filed for bankruptcy, Jacobs said he anticipated revenues would drop by more than half, to about $460 million for the year ended June 30, 2009. Annual revenue was pegged at around the $1 billion level in previous years, when Genmar touted an excess of 24,000 in unit sales.

PBH Marine might not be ready to go public if sales haven't rebounded toward that $1 billion level.

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