Malibu Boats to Acquire Cobalt Boats for US $130 Million

Malibu Boats announced that it has entered into a definitive agreement to acquire Cobalt Boats, a privately held manufacturer and distributor of sterndrive and outboard boats for an aggregate purchase price of US $130 million. The transaction is expected to close in early July.

Following the completion of the transaction, Malibu, with its headquarters in Loudon, Tennessee, will maintain an important and visible presence in Neodesha, Kansas, Cobalt’s headquarters. Paxson St. Clair will continue to lead the Cobalt business as its President, and he will become a Director on Malibu’s Board of Directors, subject to and effective upon completion of the transaction.

“This is an outstanding opportunity for Cobalt, our employees, and our dealer network,” says Cobalt’s Chief Executive Officer, Paxson St. Clair. “As our focus has always been on the long term success of the company, Malibu brings us a new level of opportunity through accelerated growth and brand awareness. I look forward to working with the Malibu team and continuing our legacy of market leadership.”

The deal is subject to adjustments for the amount of Cobalt’s working capital at the closing date as well as to any judgment or settlement in connection with a pending litigation matter between Cobalt and Sea Ray Boats (a Brunswick brand).

“It is hard to know where to start, given how positive we are about this opportunity,” says Malibu’s Chief Executive Officer, Jack Springer. “We are excited at the prospect of combining two iconic brands with extensive dealer networks, leading market shares, and strong product innovation. We are very excited about bringing Cobalt, its proven management and experienced employees into the Malibu family. Cobalt is a well-recognized market leader and world-class brand with a rich history of delivering performance, innovation and uncompromising quality. In addition, the St. Clair family is known for their passion and integrity and this has been proven and re-proven throughout this process.”

The Cobalt product portfolio consists of twenty-four models. The company sells its boats through a dealer network of 132 locations in the United States, Canada and overseas. Reportedly, Cobalt generated approximately US $140 million in net sales over the last 12 months ended March 31, 2017.

“This acquisition is consistent with our disciplined, long term growth strategy, and we believe it provides us with an immediate leadership position in a key segment of the recreational boating industry, while allowing us to diversify our product offering and tap into an exceptionally strong dealer network to accelerate Malibu’s growth and profitability,” adds Springer. “The addition of Cobalt will expand our distribution footprint and allow us to grow both brands across the combined dealer network presenting both customer bases with an array of product offerings. The addition of Cobalt will also provide us with a number of vertical integration and market opportunities that we believe will create significant value for our stakeholders.”

Malibu expects that by the end of the fourth year of operations after the completion of the transaction, the combined business will achieve a run rate of approximately US $7.5 million in cost and operational synergies. These synergies will be primarily derived from identified opportunities in product management, operating efficiencies and vertical integration opportunities.

The transaction is expected to be accretive to Malibu’s earnings per share in fiscal year 2018, excluding purchase accounting adjustments and acquisition costs. In connection with the transaction, Malibu expects to benefit from tax attributes valued on a present value basis at approximately US $18 million.

Founded in 1968, Cobalt manufactures and sells water sport boats, cruisers, bowriders and outboard boats for cruising, skiing, entertainment, surfing, fishing and other recreational uses on lakes, rivers, intercoastal waterways and oceans.

Established in 1982, Malibu Boats has two brands of performance sport boats, Malibu and Axis Wake Research (Axis).