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Don’t count this deal maker out yet - Trade Only Today

Don’t count this deal maker out yet

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When Genmar Holdings filed for bankruptcy protection June 1, it was a humbling turnabout for Irwin L. Jacobs, the company's chairman and CEO, who is more accustomed to scouting out a distress sale in bankruptcy court than seeking a judge's help in a Chapter 11 reorganization.

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One of boatbuilding's Big Two - only Brunswick Corp. exceeds it in size - Genmar owns 15 boat companies. Jacobs is fond of pointing out that some of them - Ranger, Carver, Larson, Glastron, Stratos, Four Winns - were in bankruptcy when he bought them, and others were in serious trouble.

With a rare mix of business savvy and personal charisma, a fire in the belly to conquer new Everests each day, and sheer willpower and determination, the 67-year-old Jacobs not only turned the companies around, but melded them into a powerhouse that generated an estimated $1 billion in sales in 2007.

'Stronger and better'

Genmar is hard on the rocks now, its sales for the year ending June 30 expected to be down by more than half. But Jacobs says he'll not only salvage the Genmar ship but rebuild it better. "We plan on successfully reorganizing and ultimately coming out of Chapter 11 as a stronger and better company with a bright and stable future ahead in the recreational boating industry," he said in his announcement of the bankruptcy filing.

Jacobs has faced tough challenges before, but this may be his most rigorous yet - restructuring a billion-dollar company in this nation's worst economic downturn in 80 years. He has always been a scrapper. Count on him to fight for his company.

Son of a Russian immigrant, Jacobs was just 7 years old when he started making business calls with his father, Samuel, owner of a Minneapolis business that supplied burlap bags for Midwest granaries. At 12, he was servicing accounts on his own. By 25, he was running the family business, persuading his dad to take a chance on selling burlap bags to towns and cities along the Mississippi River that needed them for sandbagging during the river's annual flooding.

Jacobs calls himself a "born peddler." He's also a deal maker and bargain hunter. He learned the art of the deal from his dad as well as his mentor and early financier, former Minnesota Twins owner Carl Pohlad. He took it to new heights in the 1970s and '80s, when he became known as "Irv the Liquidator," buying controlling shares in conglomerates, dismantling them and selling their parts at a profit - for himself, Pohlad and stockholders. He bought a string of companies: dime-store chain W.T. Grant; sports gear maker AMF, then owner of Hatteras Yachts; holding company Aegis, which owned Wellcraft; and snowmobile builder Arctic Enterprises, which held the Larson and Lund boat brands under its umbrella.

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A history of turnarounds

As a corporate raider, Jacobs was brash, adventurous, a risk-taker - all of which has served him well as he has bought up boat companies, turned them around and given them new life.

Jacobs has superb instincts for making lemonade out of lemons. In 1975, he bought the ailing Grain Belt brewery in Minneapolis - the city is still his home and headquarters for his boat companies - but it was a time when big breweries were starting to gobble up regional operations, and Grain Belt just kept hemorrhaging money. Yet Jacobs came out smelling like a rose, first selling the brand to G. Heileman Brewing Co. for a $4 million profit and later selling the brewery to the city for $4.85 million.

In today's stagnant economy, his Jacobs Trading is going gangbusters, selling the returned, excess and liquidated inventory that companies can't get rid of themselves. Yet during the last 15 years, Jacobs has shown a taste and talent not just for selling off or dismembering companies or liquidating their inventories, but building up companies and fitting them together in a corporate structure - Genmar Holdings.

Jacobs started building boats in 1978 with the purchase of the Lund and Larson brands, but it wasn't until the 1990s that he really started to expand his pleasure boat holdings, seeing in the industry an opportunity to adopt new marketing and manufacturing strategies, challenge the shibboleths of what was then a hidebound business, and build a lasting legacy. Now that legacy is in jeopardy.

New strategies

Jacobs has been an industry innovator. He also has been an iconoclast who often has proven prescient. He usually has been successful.

In 2001, Jacobs bought bankrupt OMC's boat companies for $45 million, adding to Genmar's stable the Chris-Craft, Four Winns, Hydra-Sports, Javelin, Lowe, Princecraft, Seaswirl and Stratos lines, increasing its holdings to 19 boat companies and leapfrogging the company to undisputed title of nation's largest boatbuilder, for a time. He quickly recouped some of that $45 million investment by selling off Chris-Craft.

As fast as Jacobs acquired companies, he also introduced new marketing strategies. In 1996, he bought Operation Bass, now FLW Outdoors, a Gilbertsville, Ky.-based bass tournament organizer, and signed up Wal-Mart as title sponsor of a tournament series that paid out a then-record $3.1 million in cash to anglers. Jacobs uses the tournaments and the FLW Web site (www.flwoutdoors.com) to promote fishing and market his boats. He also has sold boats at Wal-Mart to capture lunch-bucket buyers at the place where they do a lot of their shopping.

He inaugurated the Hometown Boat Show, a page at Genmar's Web site that enables customers to sign up for notifications from local Genmar dealers when they have specials. Jacobs has been unhappy about the cost of so many boat shows, to both dealers and buyers, and in 2003 started organizing his own Genmar boat shows. He eventually abandoned them because they weren't cost-effective.

New technology

Jacobs also has been a leader in new construction technology, with his VEC resin-injection and Roplene rotomolded polymer processes. The VEC process, used to build Genmar's new Fincraft fishing boat line, is four times faster than open molding and reduces styrene emissions during lamination by more than 90 percent, according to Genmar. The technology is cheaper than standard fiberglass layup, delivering a 17-foot boat with a 50-hp outboard for less than $14,000. Triumph, the builder of Genmar's Roplene-built fishing boats, claims an owner can beat the boat's hull with a sledgehammer and "nothing will happen."

Jacobs has been one of the industry's toughest critics, claiming that the old-line manufacturers and trade organizations lack creativity and marketing pizzazz, and he's frequently gone toe-to-toe with Brunswick, his chief rival.

For a man who set out to transform an industry, working through a bankruptcy has itself been a transformational - a humbling - experience, according to Jacobs. He says he and two others put $40 million in cash into the company to stave off creditors while he looked for fresh infusions of outside money that never materialized. That is ample testimony to his commitment to saving Genmar.

While the bankruptcy filings grind through the court, Jacobs won't be letting any grass grow under his feet. His VEC Technology LLC, a stand-alone company founded to sell VEC outside recreational boating, just started delivery of VEC-constructed storage containers to the Army National Guard and is developing VEC-built wind-energy blades for wind farms in the Midwest.

Jacobs may be in a tough spot, but he's still making deals.

This article originally appeared in the July 2009 issue.

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