Sea Ray: the acquisition that didn’t happen

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Brunswick expects the loss of about 825 jobs with the discontinuation of Sea Ray’s yacht and sport yacht segments.

Brunswick expects the loss of about 825 jobs with the discontinuation of Sea Ray’s yacht and sport yacht segments.

Brunswick Corp., saying that offers failed to reflect “appropriate value,” announced in late June that it would take its Sea Ray brand off the market. Instead, it plans to reinvent Sea Ray by shuttering the yacht and sport yacht segments and emphasizing outboard-powered models from 24 to 40 feet.

In Florida, the company plans to close its Palm Coast facility “as soon as practical” in 2018, while a portion of its Sykes Creek facility on Merritt Island will continue to operate for the foreseeable future to support customer service, warranty obligations and other operational requirements. The company is expecting the loss of around 825 jobs. Net cash expenditures to institute these actions are projected to fall between $10 million and $20 million, including supporting dealers to sell existing models.

The Tennessee plant, which produces Sea Ray boats between 24 and 40 feet, will continue to operate, but Brunswick intends to “take some of the complexity out of the business,” Brunswick chairman and CEO Mark Schwabero says.

MarineMax, the largest retailer of Sea Ray boats, was “disappointed” in Brunswick’s decision. MarineMax has historically represented more than 50 percent of Sea Ray’s worldwide sales. Sea Ray accounted for around 23 percent of MarineMax’s fiscal 2017 revenues. “We’re all sad, but through it, we and all the Sea Ray dealers have got to come up with a decent business plan,” says Chuck Cashman, MarineMax’s chief revenue officer. “It’s going to be tough” for some independent Sea Ray dealers, he added, but “through the years, there have been bumps along the way. This is a bigger bump, but I don’t know if it’s a bigger bump than, say, the Great Recession.”

Sea Ray’s sport yacht and yacht division represented less than 10 percent of MarineMax’s rolling 12-month revenue in the period that ended March 31. Brand and product diversification will allow MarineMax to replace the Sea Ray sport yacht and yacht revenue, the company says.

Cashman says he’s surprised at the level of interest from Sea Ray customers in the discontinued segments. “I would say since the announcement, sales have been surprisingly brisk, because customers realize when it’s gone, it’s gone,” he says. “They’re not shutting down the brand. Brunswick has done a good job communicating that it’s going to be around for service and warranty.”

Sea Ray is focusing on outboard boats from 24 to 40 feet.

Sea Ray is focusing on outboard boats from 24 to 40 feet.

MarineMax isn’t actively looking for a brand to replace the segment, which at its dealerships fell between Italian builder Azimut and Polish builder Galeon, Cashman says. “When we had three boats in that segment that we represented — and you could almost say the 70-foot Ocean Alexander would count as four — we always tried to make each brand distinct,” he says. “But we’re losing one of the channels, so we will try to widen the remaining channels.”

The company also plans to ask customers what they’re looking to do with their boats and potentially direct them toward larger Boston Whalers, Grady-Whites and Scouts, Cashman says. “Scout’s going to launch a 53-footer,” he says. “That would be a direct competitor to a 52-foot Sea Ray, though you just wouldn’t think about it that way. For right now, we had that conversation, and our decision is to focus on the brands that we have.”

Analysts reacted with some surprise to Brunswick’s move, and many ultimately supported the decision. “The only drawback is relationships, but at the end of the day, they can’t keep losing $30 million a year in that business,” says Michael Swartz, equity research director at SunTrust Robinson Humphrey. Sea Ray shipped more than 2,000 boats annually, Swartz says, estimating that around 300 to 400 of those were in the over-40-foot category.

Swartz and Cashman both say it’s good news that Brunswick plans to continue investing in the 40-foot-and-smaller segment. “That segment, which is big, will benefit from 100 percent of the attention of the people that remain,” Cashman says. “That will be refreshing — to have focus, energy, investment into what is a very big segment.”

Cashman told MarineMax clients the news by sending an email from his personal address, with his cellphone number, to every person who has bought a Sea Ray yacht or sport yacht from MarineMax. Of the nearly 40 responses he received, he says, 98 percent were positive.

“The response has been much better than I expected,” Cashman says. “They still love the brand, and thankfully, they still love MarineMax. But it’s tough. It’s tough.”

This article originally appeared in the August 2018 issue.

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