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Sea Ray put up for sale by Brunswick

Discussion in 'Sea Ray Yacht' started by PacBlue, Dec 6, 2017.

  1. PacBlue

    PacBlue Senior Member

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  2. olderboater

    olderboater Senior Member

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    This is huge. I would have thought the last, not the first, boat brand they'd consider selling. Highly likely to go to a venture capitalist much as Hatteras/Cabo did to Versa. Will take one with very deep pockets.

    Then at that point, only two ways to go. Either it will shrink in size in an effort to control costs and get investment out of it or it will be positioned for a resell.

    I see very few others with the capabilities of buying it. Beneteau is a possibility as they've shown an interest in US boat builders and already own Glastron and Four Winns. The other that comes to my mind is Berkshire Hathaway. Both of these would be good for them as the company would be kept largely intact. Yes, Berkshire Hathaway does currently own a boat builder, although much smaller.

    One thing that complicates all of this is Marine Max as by far the largest customer of Sea Ray.

    Another interesting side issue. Boat building was really something Brunswick was into to sell engines. With stern drives down, this makes sense. But how much of the stern drive business here will they lose with Sea Ray free to use other brands? I'd bet 50% of it eventually.

    And, with Sea Ray on the market, Hatteras having been sold, it begs the question regarding Brunswick and boat building. Who is next? The reason I'd guess Sea Ray ahead of Bayliner is that Bayliner sells a lot of outboards.
  3. PacBlue

    PacBlue Senior Member

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    I would also consider foreign money, the Chinese may have an appetite for such a recognized American brand.

    SR already has already been downsized to the point that they were looking at getting back the Merritt Island property that Brunswick dumped for cash during the down turn. Heard the buy back price was off the charts, so they have been really clipped in growth capabilities, once one of their main attributes.

    Brunswick is two things first - an engine company and a fitness company. Serve those two interests first, especially since the CEO comes from the engine side. SR has been holding their own for the Brunswick Boat Group, but may be the most profitable asset that can be cashed in for the time being. The rest of the boat group supports Outboards and Stern Drives, hard to imagine more attrition.

    SR is in need of a face lift, many opportunities for those with the right vision to lead them into the future.
  4. olderboater

    olderboater Senior Member

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    Not all that much left to support in stern drives and the only remaining boat brand they have with stern drives is Bayliner and Bayliner's volume is in outboard boats now. I would estimate 90% of their boats sold are outboard.

    So that leaves Mercruiser to compete in the general market. This could eventually help them there as many builders push Volvo because they don't want to push the engine of their competitor.
  5. Prospective

    Prospective Senior Member

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    Any chance Marine Max buys them I wonder?
  6. btyson

    btyson Member

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    My bet is on an upmarket builder that could use a volume line to augment their ability to source components/engines at better prices.
  7. PacBlue

    PacBlue Senior Member

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  8. olderboater

    olderboater Senior Member

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    It took them years to sell Hatteras/Cabo. Rest assured they've been trying to locate a buyer. Perhaps gotten offers but not what they wanted. Now, by going public, they hope for multiple bids. I think it's most likely to be venture capitalists because those in the business are more conservative and aren't going to be willing to give the offers that venture capitalists would.

    The problem is that all their reasons for selling are reasons to have concerns as a buyer. It's a brand built on I/O's and their sales are dropping every year. Finally they introduced outboards but based on price they couldn't compete with Bayliner. Since many dealers are the same, they order Bayliner outboards and Sea Ray I/O's. They also have no jets. Yet, the number one selling boat in the under 25' range is a jet. I compare them to Chaparral which introduced their Vortex line of jets, their H2O lower priced line and really promoted Robalo, all outboards. So, while the basic stern drive business stuggled, they gained in all other areas.

    Now, I also see a lot of opportunities if an aggressive, well financed buyer were to appear. First, expand the outboard offerings and add some smaller and less expensive models. Toss in even some center consoles, not high performance, but family style boats. Then add some jets in the 20-25' range. Offer a choice of engines, Mercruiser or Volvo. Offer a choice of outboards as well. On your larger boats offer more engine options and on pod boats, offer IPS and larger engines that way. Solve your quality control issues on the L Series and expand it. Become less dependent on Marine Max and rebuild your Sea Ray network. Go aggressively against Bayliner and Glastron. Breaking two existing ties could do wonders in opportunities. That is the engine tie with Mercury/Mercruiser/Zeus and the tie with Marine Max and Bayliner. Bayliner goes from your sister to being the enemy and suddenly you have one huge advantage. Bayliner can only offer Mercury and Mercruiser. You can offer all outboards and Volvo I/O's and pods. Even center consoles, you no longer have to worry about stepping on Boston Whaler's feet so offer some small ones and have engine choices there. Then rebuild dealers committed to you, not with such mixed alliances as Marine Max has. Where Marine Max performs, that's fine, but they don't everywhere.
  9. PacBlue

    PacBlue Senior Member

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    All good points.

    Hard but not impossible to restructure the Dealer Network agreements, even with MM wielding the big stick. I would assume they will mostly stay intact, as the new CEO would have to take on the added pressure of trying to immediately recoup any lost revenue from distancing themselves from MM, something few would take on.

    Operating outside of the Brunswick umbrella, it looks like there is really a positive upside to be had, it will be interesting to see who are the interested parties?
  10. PacBlue

    PacBlue Senior Member

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    Olderboater's post got me to thinking what would be a wish list for a Brunswick-free Sea Ray corporation? I will start with some of his recommendations and a few others:

    1. 25' and under Jet Boat Line
    2. Bring back the Amberjack line, OB powered CC, Express and Walk-around SF under 40'?
    3. What about a performance line with real stepped hulls this time?
    4. Can you envision an new OB Catamaran line?
    5. Give Meridian new life as a fast Modern Pilothouse Trawler type, 20 knots cruise (or so)?
    6. Re-do the L line based on lessons learned from their first dive into this class of boat. Address the Quality issues is job #1.
    7. A modern/fuel efficient hybrid model, dare I say with a plumb or near plumb bow and change in styling?
    8. How about an under 20' RIB line?

    Capacity and output are their strengths. Need a visionary who can capitalize on those. And finally, get people who can address AND eliminate nagging warranty issues, cut through the excuses. Will require a strong decision maker and someone with enough experience to cut through the production plant list of issues and smoke screens.
  11. olderboater

    olderboater Senior Member

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    Following PacBlue's ideas.

    I would separate the company into profit centers, of course all feeding up to one corporate group. Where possible the profit centers would even have their own manufacturing facilities or separate lines in the main one.

    1. Sea Ray runabouts. Increase the number of outboards and go down to 16'. Outboards and I/O's under this umbrella. Must have some very basic low priced entry level models. Perhaps add catamarans.
    2. Sea Ray Jets. Comparable to Vortex from Chaparral, competing with Yamaha but better ride.
    3. Sea Ray Sundancer. 26-45'. Include outboard sport cruisers like the 32' they have now. Continue to add models with fly bridges. The fly bridge models eliminate the need for Meridian. The 400 Fly is right on target. Deemphasize I/O's and increase straight inboards. Perhaps offer some pods.
    4. Sea Ray Yachts. Back from the dead and previous failures. No more L Series. Call them Yachts and expand upward in size. Hybrid, if developed, would fall under this.
    5. Sea Ray Fish but some better name. Outboard powered to compete with Robalo and Wellcraft and even Boston Whaler. Not for the fishing professional high end center console customer but for the family. Oh, a wild thought would be to buy the Cabo name.
    6. Sea Ray Ski and Wake. Straight inboards aimed at that market. Could even build with an acquisition of a small competitor in that market.
    7. Sea Ray Performance. This would come from an acquisition and maintain the existing name, but use Sea Ray's production facilities and ability. Plenty of easily purchased lines that no longer can stand alone but would be nice image boosters. Maybe Fountain or Baja? Or bring back some history and old names. I had a 22' Pachanga during my college years. This would be the least important of anything listed at the present time.
    8. Sorry...no ribs. They know nothing about producing ribs.
    9. The one other acquisition I wouldn't mind is a pontoon manufacturer.

    The odds of someone coming in and being willing to spend the capital to do all that is very slim. Most buyouts are highly leveraged and that doesn't make building a brand easy. I would love to see someone ready to build the company but the odds are against that.
  12. PacBlue

    PacBlue Senior Member

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    How much is a company bought in 1986 for $350 million worth today??
  13. olderboater

    olderboater Senior Member

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    In my opinion, much less than that. I haven't seen the books or anything but I'd value Sea Ray off the top of my head between $100 and $150 million.

    The entire boat group sells less than $1.4 billion a year and operating income has been $17, 38, and 61 million the past three years. Total assets of the boat group were around $425 million. My best estimate is Sea Ray's sales are around 1/4 of that total or $350 million.If so, it's operating income perhaps averaging $10-15 million. They probably should be making $35 million or so.

    Not that many years ago, Glastron, Four Winns, Wellcraft, Ranger, Stratos, and Champion and a couple more sold for around $50 million and Larson, Carver, and Marquis brought another $10 million.

    Sea Ray is worth what a willing buyer will pay but $100-150 million sees like a good price to me for a willing buyer to pay. I'd never go near that amount, perhaps half of it if I was involved in buying.
  14. olderboater

    olderboater Senior Member

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    The death of stern drives.

    In 2005, there were 72,000 sold per year in the US, down from 78,000 in 2000. Now there are fewer than 15,000. While all market segments dropped in 2008 and 2009, the other segments have all gained since and stern drives just kept going down. Sea Ray was a stern drive driven company. Slow to react and push outboards, still not jets, slow to bring inboards, gas and diesel, into small cruisers and limited on pods due to the Cummins size limitations.
  15. PacBlue

    PacBlue Senior Member

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    I think your numbers are off. Some recent purchases of note:

    2017 - Malibu buys Cobalt (basically a stern drive line) for $130M USD
    2017 - Mastercraft buys NauticStar (OB CC line) for $79M USD
    2015 - Correct Craft buys Centurion (another ski boat line) , undisclosed price.

    But the interesting trend from above is that these are Inboard boat manufacturers with cash to spend. The stern drive market buyers fled to the Wakeboard/Ski segment.
  16. PacBlue

    PacBlue Senior Member

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    Here is a deeper dive behind the sterndrive story.

    As I noted before, you are always under pressure to keep your parent companies core business moving. In this case, Mercury/Mercruiser engine sales. Brunswick was stern drive focused because they had better profits on this product line, and were more than happy to keep SR and Bayliner products aligned with this approach. This includes corporate decisions on product development new models and R&D budgets. Through in Marine Max, who has expanded influence on new product direction, and who can also supplement/respond to market conditions with other brands/partnerships, and you have another force that enabled the slow market response from SR to adapt to changing conditions, like the expanding OB markets. But Brunswick filled there OB needs with Boston Whaler and the various lake/pontoon boat brands, so what did SR mean for them, especially because no one really embraced Zeus (another corporate product) and had models using non-Brunswick branded inboard diesel engines. Remember, got to keep the corporate guys happy, especially because the new CEO is an engine guy.

    So SR was in-between a rock and a hard place, without visionary leadership to keep them in the right markets with the right product mix. Most of the guys that had a hand at their helm where not "boat' guys. They fell for the mantra of "new products sell' which in many cases, due to R&D Budgets and lack of development time, meant refreshers instead of truly new products. Features and styling was their focus, without a good approach for designing for manufacturing, i.e., design details trumped what could be affordably/easily manufactured.

    These types of events would not have happened under Connie Ray's approach, and that is the light at the end of the tunnel. A true leader in the boat business can make this brand work again, even better when they have the autonomy to structure their business without outside influence from the other two major factions. The old adage, relationships in groups of three are hard to maintain.
  17. olderboater

    olderboater Senior Member

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    The purchase of Cobalt would be the best comparable. They would be in the upper range of a purchase price. Cobalt has been profitable even with the drop in stern drives as they are at the upper end and they're more profitable than Sea Ray. Cobalt and Chaparral have been the success stories of the industry.

    Correct Craft obviously has been in acquisition mode from engine builders to boats.

    Now, could I see someone perhaps stretching it to $200 million? It's always possible, but I definitely don't see it worth it.

    Notice, I did say Sea Ray needed a ski and wake boat line. The lakes are full of bass boats, pontoon boats, outboard runabouts, and ski and wake boats. Still some stern drives and some jets but those other type boats are the ones booming.
  18. olderboater

    olderboater Senior Member

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    Here is some information which shows what had happened to Sea Ray in the 24-29' sterndrive market. In 2016, per Cobalt, market shares were:

    Cobalt 29%
    Sea Ray 15%
    Chaparral 14%
    Regal 9%

    In total, Sea Ray once sold 280,000 boats a year and now sells less than 30,000.

    By comparison, Marine Products Corporation (Chaparral and Robalo) sold 5,000 boats last year.

    Marine Products estimates the total market 18-33' fiberglass as follows:
    Sterndrives 12,000 boats
    Outboards 45,000
    Inboards 9,200
    Jets 2,500

    Chaparral claims to be number one in units of 18-33' sterndrives. That is different than the numbers above as Cobalt doesn't compete under 24'. They claim Cobalt is #2, followed by Sea Ray and Bayliner.

    Marine Products sales are $241 million, operating income $23 million, net income after taxes $17 million, equity per books $65 million, market cap $518 million. They are by far the most valuable US boat manufacturer in the market Sea Ray is in. They've always been profitable, even when the market collapsed, and pay nice dividends. They, like Malibu, definitely gain value by being public companies. I could see that in Sea Ray's future at some point. Malibu's market cap is now $627 million.

    So, the real path to value is to expand and reshape Sea Ray's lineup of boats and to go public.

    As an aside, Cobalt did win their suit against Sea Ray for the retractable swim step patent for $2.7 million. I do not know if that has been appealed.
  19. Capt Ralph

    Capt Ralph Senior Member

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    I saw a later Cobalt just today. 30sh something.
    Dark hull and not a wrinkle.
    HOT new look not around here before.

    A SeaRay has always been recognized miles away. IMO; SSDD..

    Regals have some nice new shapes out there also.
  20. Capt J

    Capt J Senior Member

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    I've read that Searay's sales are 10% of what they were in the heyday. I have been seeing searay bowriders and stuff with outboards on the transom.