Malibu Boats to buy Cobalt Boats for US$130m

The Tennessee boatbuilder says combining two premium recreational boating brands will further strengthen Malibu's already strong position in the powerboat industry.

For the 12 months ending March 31, 2017, Kansas-based Cobalt generated approximately $140 million in net sales globally.

The manufacturing synergies include a complementary distribution network, which allows for more opportunities across multiple segments within the recreational boating industry, and greater scale with a more balanced portfolio.

A private family business founded in 1968, Cobalt Boats manufactures and sells watersports boats, sportcruisers, bowriders and outboard boats for cruising, skiing, entertainment, surfing, fishing and other recreational uses on lakes, rivers, coastal waterways and oceans.

At last count, the Kansas-based boatbuilder had 24 Cobalt models on offer through a dealer network of 132 locations in the United States, Canada, and overseas.

BOLSTERING THE MALIBU BUSINESS
In a statement to investors, Malibu said the aggregate purchase price of $130 million is subject to customary adjustments for the amount of working capital in the business at the closing date.

The sale was also subject to adjustment for any judgment or settlement in connection with a pending litigation matter between Cobalt and Sea Ray Boats, Inc. and Brunswick Corporation. The legal matter pertains to a claimed infringement of Cobalt’s flip-down transom step.

In the statement, Malibu says its combined business is anticipated to deliver approximately $7.5 million in synergies and operational improvements, and approximately $18 million in expected tax benefits.

Founded in 1968, Cobalt is a market leader in the mid- to large-sized sterndrive boat market and its recent expansion into the surf and outboard markets provides further opportunities for Cobalt to reach additional customers.

EXPANDED DEALER NETWORK
Malibu's Chief Executive Officer, Jack Springer, said the company was excited at the prospect of combining two iconic brands with extensive dealer networks, leading market shares, and strong product innovation.

"We are very excited about bringing Cobalt, its proven management and experienced employees into the Malibu family. Cobalt is a well-recognised market leader and world-class brand with a rich history of delivering performance, innovation and uncompromising quality.

"In addition, the St. Clair family is known for their passion and integrity and this has been proven and re-proven throughout this process," Mr Springer said.

This acquisition was said to be consistent with Malibu’s disciplined, long-term growth strategy that allows the business to diversify and tap into an exceptionally strong dealer network to accelerate Malibu's growth and profitability.

"The addition of Cobalt will expand our distribution footprint and allow us to grow both brands across the combined dealer network presenting both customer bases with an array of product offerings.

"The addition of Cobalt will also provide us with a number of vertical integration and market opportunities that we believe will create significant value for our stakeholders."

COBALT GOES PUBLIC
Cobalt's Chief Executive Officer, Paxson St. Clair said the acquisition by public company Malibu Boats was an outstanding opportunity for privately owned Cobalt Boats.

"As our focus has always been on the long-term success of the company, Malibu brings us a new level of opportunity through accelerated growth and brand awareness. I look forward to working with the Malibu team and continuing our legacy of market leadership."

Malibu expects that by the end of the fourth year of operations after the completion of the transaction, the combined business will achieve a run rate of approximately $7.5 million in cost and operational synergies.

The transaction is expected to be accretive to Malibu's earnings per share in fiscal year 2018, excluding purchase accounting adjustments and acquisition costs. In connection with the transaction, Malibu expects to benefit from tax attributes valued on a present value basis at approximately $18 million.

The transaction is expected to close in early July, subject to customary closing conditions. Malibu will fund the transaction through borrowings under a new second amended and restated credit facility.

Both Malibu and Cobalt have enjoyed expanded dealer networks in Australia in the last few years and the status quo will remain with local distributors of both brands for the foreseeable future.

More at
Malibu.