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Genmar’s day of decision is approaching

More than seven months after the company declared bankruptcy, an auction on the assets of Genmar Holdings is scheduled for Jan. 7.

Project Boat Holdings LLC, an affiliate of Platinum Equity, a Beverly Hills, Calif.-based global acquisition firm, is the stalking horse bidder in the proceedings. It has submitted a bid of $55 million for assets used in the design, manufacture and sale of the following brands: Ranger, Stratos, Champion, Wellcraft, Four Winns, Glastron and Larson. The assets in the bid also include facilities in Flippin, Ark., Cadillac, Mich., and Murfreesboro, Tenn.

The stalking horse bidder "will enable an auction process in which other parties can submit bids for the same assets as Platinum or a different combination of assets, provided it results in higher value to the estate," according to court documents.

"We are pleased to have a firm of Platinum's resources and reputation taking the lead in the auction process," says Genmar's chief restructuring officer Mark Sheffert. "Getting Platinum in place as the stalking horse bidder was the beginning of that process, but we are continuing to sell those brands and we have interested parties, and we anticipate this will all come to a close by mid- to the end of January."

Platinum's stalking horse status does not guarantee it will eventually own those boat lines and/or facilities, Sheffert says. However, if Platinum is outbid at auction, it would be entitled to a "breakup fee" of $2.5 million or an expense reimbursement fee of up to $1.5 million, though not both. A breakup fee is a customary element of a stalking horse asset purchase agreement.

Platinum's bid does not include Carver, Marquis, Seaswirl, FinCraft, Hydra-Sports, Javelin and other brands, or real estate and production facilities in Little Falls, Minn., Pulaski, Wis., and other locations. The sale proposal also does not include the ownership of approximately 93 percent of VEC Technology.

As for the brands Platinum is not interested in purchasing, Sheffert says, "We continue the sale process for those brands as well and we will include them if there are bids for them in the auction, or we will sell them separately."

Former Genmar chairman and CEO Irwin Jacobs, who stepped down in November to avoid a potential conflict of interest, says he still plans to bid for at least some of the company's assets. "I will be a bidder," says Jacobs. "In addition to whatever my bid will be, [it] will also include the Larson/Glastron factory in Little Falls and the Pulaski Marquis/Carver factory and the VEC stock in Genmar."

Jacobs would not comment on Platinum's bid or give additional details about his bid.

Finding a suitor

Genmar has been working with Houlihan Lokey Howard & Zukin Capital since last summer to find a party or parties interested in purchasing the company. It sent out 80 copies of the memorandum to private equity groups, hedge funds and strategic buyers approved by Genmar.

By Sept. 28, Houlihan had received 12 letters of interest and began negotiations with several prospective buyers. Since approximately mid-October, negotiations have focused on Platinum, according to court documents.

Platinum was founded in 1995 and has completed nearly 100 acquisitions. Among its more recent purchases are the San Diego Union-Tribune newspaper, Canvas Systems, Pomeroy IT Solutions, and DAUM Commercial Real Estate Services. Platinum has a diversified capital base that includes the assets of its portfolio companies, which generated approximately $11 billion in revenue in 2008, according to court documents.

On Oct. 30, Genmar petitioned the court to grant exclusivity to Platinum and that motion was approved Nov. 5.

"With several significant boat shows in January and February, the debtors' business is approaching a crucial point in its selling season," Stephen Spencer, a director of Houlihan, says in court papers. "The debtors have over 1,000 dealers that rely on it to manufacture boats and it is essential that these dealers ... be given a degree of certainty as to the future of the debtors' operations.

"The [asset purchase agreement] provides the market with this certainty, while still allowing the opportunity for higher value to be delivered to the estate through a competitive auction process," says Spencer. "Every day that this process elongates creates greater uncertainty and risk for the estate."

Sheffert asserts that Genmar dealers should feel optimistic with this latest development. "Within the next 45 days or so, 60 days, there will be a transition with Genmar assets to very strong, financially strong buyers who will have significant capital to invest and grow the business," he says.

This article originally appeared in the January 2010 issue.



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