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

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.

According to industry sources, the combined brands probably still generate sales south of $500 million. Though a recovery is under way, industry data illustrates that boatmakers still have a ways to go until they reach the levels they were hitting in the early 2000s.

Total unit sales for powerboats in the U.S. totaled 344,000 in 2000, but fell to 140,000 in 2010 and 2011, according to data provided by B. Riley's Baker. Unit sales are on track to hit about 161,000 during 2013, and further improvement in 2014 is expected.

If PBH Marine does end up pursuing a sale rather than a public offering, it isn't likely to garner much interest from strategics, according to industry watchers.

Aside from Brunswick, only three boating-related companies are publicly traded: Marine Products  (MPX), which makes stern-drive powerboats through its Chaparral Boats subsidiary; boating supply retailer West Marine Products (WMAR); and boatdealer MarineMax  (HZO).

"Brunswick's days of being an aggressive acquirer of brands is probably over," Baker said. "I wouldn't expect that to be the exit vehicle of choice for many of the PE groups that have gotten involved in the space."

Though Marine Products is a potential acquirer, Baker added, it probably doesn't have the appetite for something as large as a multibrand holding company.

Given that it is likely to buy singular brands that are incremental to the categories it already participates in, PBH Marine's Ranger, Stratus or Triton brands would all be potential targets, given Marine Products doesn't have much exposure to freshwater boats, Baker said.

Houlihan Lokey managing director Stephen Spencer, Genmar's bankruptcy manager a few years back, thinks either a public offering or sale are possible, but he favors the latter.

The streamlined and consolidated manufacturing platforms of PBH Marine's Glastron and Four Winn brands make the company an attractive acquisition candidate, he explained.

"In my view, a sale may be more likely," Spencer said in a phone interview. "A number of PE groups, particularly those that own related assets, might find Genmar's premium brands and restructured manufacturing capabilities enticing. As far as pure strategics are concerned, they can be more fickle, but I suppose Brunswick is always a possibility."

Platinum Equity officials couldn't be reached.

-- Written by Sarah Pringle

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