Brunswick Corporation today announced that it has put an end to sales efforts for the Sea Ray business, choosing instead to retain and refocus on its 25ft-40ft sport boat and cruiser categories currently produced at its Tennessee facilities.
The company will wind down production of Sea Ray sport yacht models above 40ft in the third quarter, built at its Sykes Creek and Palm Coast, Florida facilities and involving the elimination of as many as 825 positions.
“Over the last several months, we have engaged in a thorough sale process for the Sea Ray business, which we believed would generate the highest value for our shareholders,” says Brunswick chairman and CEO Mark Schwabero in a statement. "Although there was interest in the business, the offers we received did not reflect an appropriate value for this premium brand, and did not meet our expectations. The lower value was largely due to the persistently weak financial performance of the yacht product category, which complicated and obscured the value of the remainder of Sea Ray.”
In a conference call today, Schwabero detailed some of the financial details of the revised decision, which he called a ‘Plan B.’ “As the sale process neared conclusion, we started to evaluate other strategic options beyond our original plan to sell the Sea Ray business in its entirety,” he continued. "Based on that re-assessment, we have concluded that our best opportunity to maximise value is to retain the Sea Ray brand and refocus the business on the sport boat and cruiser product portfolio.”
In 2017, the Sea Ray business, including the Meridian brand, recorded sales of $387.6m but suffered operating losses of $17.2m. Schwabero said sales of Sea Ray products up to 40ft would provide incremental revenue of approximately $225m with improved profitability, which will be reflected in financial results for the second quarter within continuing operations. Restructuring costs for the discontinuation of the yacht business were estimated at between $50m-60m, and will also be reflected in 2Q results.
The Palm Coast site is targeted for closure as soon as practical in 2018, while a portion of Sykes Creek will continue to operate for the foreseeable future to support customer service and warranty obligations, along with other operational requirements. “We will maintain the capability to provide outstanding service and support to our dealers and installed base of all Sea Ray customers, consistent with the Sea Ray brand promise and history,” Schwabero adds.
Schwabero said the new focus on Sea Ray models up to 40ft would result in greater synergies across the Brunswick business and benefit from the extensive product development in the Mercury engine platform and related technology advancements. He also noted that Sea Ray models up to 40ft are already optimised to take advantage of the explosive growth in the outboard-powered segment. “We believe that this is the best solution to generate value for our dealers and shareholders now and in the future.”