Mr. Wizard Looks into Brunswick's Future

What's Next for Brunswick?

by Mr. Wizard

This page is operated by RBBI and is NOT an official Brunswick page.
All comments below are purely speculative and are in no way to be construed as fact.

Mr. Wizard, a marine sorcerer and one of our regular readers, recently commented RBBI is becoming well known for supplying the latest coverage of breaking boating industry news. He volunteered to help us by supplying tomorrow's news today, just like he does for the TV show, Early Edition. I told him I'm allergic to cats and he offered to e-mail us an occasional column instead. His first effort is below.

What's Next for Brunswick?

By Mr. Wizard
5 August 1998
Many magazines, periodicals, web sites and newsletters report boating industry news. That's a piece of cake. When is the last time you saw one of them predict the future? Predicting the future is tough, especially on a limited budget (it takes lots of boiling cauldrons full of frogs, bats, and hazardous chemicals.) I promise to do my best, and I also look forward to your input and feedback. Now, on to today's topic.

Looking at the other major players in the industry:

Major events have been happening "rapid fire" in the Brunswick Camp.

  1. Brunswick went "ape on acquisitions" in an attempt to reduce marine industry dependence.
  2. Toyota announced its US Marine group - 21 Feb 1997
  3. David Jones "defected" to OMC - 25 Sep 1997
  4. Brunswick was put under Federal Trade Commission investigation for anti-trust violations
  5. MarineMax, a coalition of several of the largest SeaRay dealers, went public - 3 June 1998
  6. Brunswick lost the stern drive portion of monopoly lawsuit ($133 million) brought by the Independent boat companies. Outboard portion has yet to be tried.- 19 June 1998
  7. John Russell replaced Roger Patterson as head of US Marine (Bayliner) - 2 Jul 1998
  8. MerCruiser was concerned about maintaining production during the GM strike - 2 July 1998
In addition to the "facts" above, there is a rumor Brunswick may be about to "shuffle the deck" on the product lines under US Marine and Sea Ray, its largest boat companies.

Is there some underlying purpose Brunswick is working toward, or being forced toward? They have spent (acquisitions) or lost ( $133 million lawsuit plus defense costs) a lot of money, and are having FTC (Federal Trade Commission) monopoly problems. If they were to sell off a significant portion of their boat company operations they could kill two birds with one stone. The FTC would leave them alone, and they would have cash to setup a cash reserve for the lawsuit and pay off some of their recent acquisitions. Is Brunswick preparing one of its two largest boat companies, US Marine and Sea Ray, ready for divesture?

Heat from the FTC investigation, loss of the Independent Boat Builders suit, and Peter Larson's (Brunswick CEO) strong desire to reduce dependence upon the marine industry are forces that could prompt a move of this nature.

Which one will they sell?

The industry is volume driven, so they would sell the lower volume unit (Sea Ray) and keep the high volume Bayliner line. Brunswick wants to be the largest producer in each segment of the active recreation market it participates in. Hanging on to Bayliner would allow them to keep that distinction.

Roger Patterson was recently pulled out of US Marine. His new assignment of "developing operating synergies among the company's marine organizations" sounds like a temporary one. Maybe he could be made available to run the new unit? or to be the major go between for the new owner and Brunswick?

Who would buy Sea Ray?

An internal buy out, such as selling it to several high ranking Brunswick and Mercury Marine types would not get the FTC off their back. The sale needs to be to an established firm. Firms outside the boating industry might want in, but you would expect them to "get their feet wet" with a smaller boat company first before making a substantial investment like this one. Many boat builders are captive companies belonging to drive companies. OMC is seen as the enemy and in major financial strife anyway, they seem out of the running.

Marine Max? They might want to buy Sea Ray, but my elves report not all is well in their camp. They are probably too busy trying to keep their own ship afloat to worry about it at this moment.

Yamaha is a possible suitor. They are a major builder in Asia and have a long standing relationship with Brunswick. It's certainly possible, but I think there is a better suitor that brings additional synergies to the table. Also, much of the Brunswick-Yamaha relationship was through David Jones who is no longer at Mercury.

Toyota is trying to enter the market. Their image of quality, excellence, and a "step above" fits exceptionally well with the Sea Ray product line. Besides the US ski boats just released, Toyota has been producing cabin cruisers in New Zealand for sale in Japan. This has given them some experience with the type of craft produced by Sea Ray. Many of Sea Ray's boats currently use "big block" engines and could continue to be powered by Mercury Marine while Toyota begins to develop a full marine engine line of their own.

Is there synergy in the sale for Brunswick?

Are there threats to Brunswick if U.S. Marine or Sea Ray is not sold?

Are there some synergies for Toyota beyond immediately gaining a major foothold in the market?

Are there threats to Toyota if they do not "buy in"?

All the other major player have "bought their way" into the market by acquiring boat companies. It is expected that Toyota needs to do the same. They can "get their feet wet" with the ski boat program, but to become a major player in the industry they need a wide range of models, distribution and service. You get that by acquiring boat companies.

Many boat companies have images that do not "mix" with Toyota. Inferior products, poor designs, bad reputations and the poor image of these companies would be very hard and expensive for Toyota to "turn around." Sea Ray portrays the image Toyota wants.

Sea Ray is the only very large opportunity of this nature. If they miss it, its gone and they are stuck with a large number of smaller companies with image problems.

How much is Sea Ray worth?

Jack Reichert gave $350 million for it in December of 1986. The Bayliner ($425 million) and SeaRay purchase prices were later challenged as they were significantly higher than the actual value of the assets of the companies. Brunswick wrote the difference off as goodwill, which was later challenged by the courts.

Many boat companies have sold for a great deal more than their assets. The value of a business can be estimated in several ways. (1) the value of its assets, (2) the value of the cash flow it generates, (3) its annual sales. In many industries, companies trade for something near their annual sales. If they were making about 10% on sales, the new buyer would also be making about 10% return on his investment.

By far the most expensive component in a boat is the engine(s) and drive(s). Since these are somewhat passed through, it might not be fair to pay the full annual amount of annual sales for a boat company. At the extreme, its like making refrigerator magnets, buying refrigerators, installing your magnets, and then selling the assembly. There is a lot of cash changing hands due to the value of the refrigerator which you really had little to do with. Someone else could come along and do the same thing with minimal investment.

Looking at the MarineMax news clips and their prospectus, they claim to have had $234 million in sales in 1997 which was about 20% of all SeaRay new boat sales. That would put SeaRay new boat sales at about $1.17 billion. They may have had additional income from financing, service parts, etc but they are in the billion dollar range.

But, the same prospectus says their annual sales is in the range of 5% of Brunswick Marine Group sales. Brunswick marine sales in 1997 were $2.38 billion. This does not compute. MarineMax sales were more on the nature of 10% of Brunswick marine sales. I find it tough to believe Sea Ray represents about half of Brunswick marine sales (1.17find it tough to beliefind it tough to believe Sea Ray represents about half of Brunswick marine sales (I find it tough to believe Sea Ray represents about half of Brunswick marine sales (1.17 billion vs. 2.38 billion). U.S. Marine, Mercury Marine, Quicksilver and all the other boat companies make a considerable contribution to sales as well. However, much of Mercury Marine's sales are internally transferred to Brunswick boat companies. Bottom line, better have a billion $ or more before you belly up to the negotiation table.

How might negotiations between Toyota and Brunswick be initiated?

Toyota could approach Brunswick and ask them if they had interest in the new marinized Toyota ski engine. Once a dialog was established, conversations could widen.

Or perhaps they will read this column, get the idea and my prophecy will become self fulfilling?

Either way, Brunswick having a longstanding Japanese relationship (Yamaha), and Toyota having a major US presence should break down some of the cultural barriers of doing business. However, there are still a lot of skills involved in negotiating with the Japanese.


Get ready to read the headlines, "Brunswick sells Sea Ray to Toyota", by the end of the year.

Until next time!

Mr. Wizard


Please tell Mr. Wizard if you liked his column, if you think he's out to lunch, or any comments you may have. Send E-mail to


5 Aug 1998

A reader suggested Brunswick might "loan" the money to Marine Max to allow them to purchase Sea Ray.

6 Aug 1998

A reader summarized his views and some materials in this week's "Automotive News" on the Volvo situation.

"Volvo currently has no plans for any merger or sale of the 
company. Since the Renault deal fell through there has 
been a decision made to avoid any merger or acquisition. Volvo 
will instead do joint projects with partners around the world. ...
I can see a future in which Volvo decides to concentrate solely on 
heavy trucks and sells off the marine division. I don't think there is 
any near term sale of Volvo to worry the Penta people."

6 Aug 1998

"I really enjoyed the future of Brunswick article.  It made so much 
sense wondered why I didn't think of it.  Would be a good fit with 
Toyota and allow Brunswick to diversify out of boats.  Time will
tell. Keep up the good work."

9 Aug 1998

A reader mentioned Japanese businesses (like Toyota) rarely acquire other companies. They tend to create alliances with them.

9 Aug 1998

Wonderful article.  As an industry follower and peripheral 
participant, such commentary keeps me closely tied to
the industry.  The speculation is fun too!  Looking forward 
to more.  

Regarding confusing figures -
Is it possible that  Marine Max figures referred to retail sales $ 
vs. wholesale figures reported by SeaRay which would explain
the ratio discrepancies in comparison to Brunswick sale figures. 

Date: 10 Aug
From: Tearpitz
Subject: Re: What's next for Brunswick?
Brunswick is probibly seeking out its next victim.Buy a boat 
company for its name,and lower the quaility.Great!

Date: Wed, 12 Aug 1998
From: fritz
Subject: Re: What's next for Brunswick?
(Tearpitz) wrote:
> Brunswick is probably seeking out its next victim.Buy a boat 
> company for its name,and lower the quaility.Great!

Isn't Brunswick (AMF)the same company that nearly destroyed 
Harley Davidson years ago??

Date: Thu, 13 Aug 1998
From: blue
Subject: Re: What's next for Brunswick?
fritz wrote:
> Isn't Brunswick (AMF)the same company that nearly destroyed 
Harley Davidson years ago??
AMF is a competitor of Brunswick in Bowling equipment and lanes.  
Brunswick never owned Harley but AMF did.  AMF's primary 
business is bowling. Brunswick's primary business is active living 
recreational sports. This includes; billiards, bowling, camping 
equipment, bicycles, fishing equipment, marine propulsion and boats.  
I'm probably missing a few.  They used to own some defense 
suppliers but sold to concentrate on core products.  Brunswick
would have been a better fit with Harley because at least they 
have some engine manufacturing experience with mercury/mercruiser. 
AMF had no idea that they were sitting on a gold mine with 
Harley-Davidson. It is doubtful that Brunswick will buy any more 
boat companies.  The boating business is very cyclical and 
when the economy suffers, boating suffers proportionately.  They
don't want to put too many eggs in one basket. Some in this 
newsgroup make brunswick out to be the evil empire. They wouldn't 
be number one in most of the industries they serve if they didn't 
sell people what they want.  In the business world you either grow 
of die.  Brunswick has chosen to grow and does so aggressively.

Date: Thu, 13 Aug 1998
From: LEngelb
Subject: Re: What's next for Brunswick?

Brunswick and AMF are two different companies. They are both
in the bowling business. It was AMF that owned Harley Davidson. 

Date: Thu, 13 Aug 1998
From: Gary
Subject: Re: What's next for Brunswick?
In 1995 Brunswick celebrated their 150th
anniversary. That's a sign they've made some
good long term decisions.

Date: Fri, 14 Aug 1998
From: blue
Subject: Re: What's next for Brunswick?

emercier wrote:
> AMF wasn't sitting on a gold mine at the time Harley Davidson was sold.
> Harley was getting killed by the imported big bikes from Japan.  The 
> biggest thing that saved Harley was Ronald Reagan implementing 
> selective trade restrictions on 4/1/1983 that were so punative they 
> essentially eliminated the competition from Japan.  They restrictions 
> were discriminatory, since they targeted Japan exports, and essentially 
> exempted the West German, British and Italian exports. There is an 
> excellent analysis of this at the site, check out 

Read and enjoyed the analysis.  Too bad  companies too often take the 
short view of running a business.  Short term profits at the expense of
long term viability. If I remember correctly, the tariff was lifted two 
years  early because the market for Harley-Davidson motorcycles 
increased  dramatically with the introduction of their Evolution engine.

>   blue wrote:
>> Brunswick would have been a better fit with Harley because at 
>> least they have some engine manufacturing experience with 
>> mercury/mercruiser. AMF had no idea that they were sitting on 
>> a gold mine with Harley-Davidson.

Recent Brunswick Acquisitions

Dates are approximate

American Camper 8 Mar 1996
Boston Whaler 31 May 1996
Roadmaster Bicycles and Flexible Flyer Sleds 6 Sep 1996
Igloo Coolers 3 Jan 1997
Hoppe 7 Mar 1997
Bell Sport's Mongoose Bicycles 28 Apr 1997
Life Fitness 9 Jul 1997
Hammer Strength Equipment 13 Nov 1997
DBA Bowling Products 20 Nov 1997
Parabody Exercise Equipment 2 Feb 1998

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