Sea Ray put up for sale by Brunswick

This is huge. I would have thought the last, not the first, boat brand they'd consider selling. Highly likely to go to a venture capitalist much as Hatteras/Cabo did to Versa. Will take one with very deep pockets.

Then at that point, only two ways to go. Either it will shrink in size in an effort to control costs and get investment out of it or it will be positioned for a resell.

I see very few others with the capabilities of buying it. Beneteau is a possibility as they've shown an interest in US boat builders and already own Glastron and Four Winns. The other that comes to my mind is Berkshire Hathaway. Both of these would be good for them as the company would be kept largely intact. Yes, Berkshire Hathaway does currently own a boat builder, although much smaller.

One thing that complicates all of this is Marine Max as by far the largest customer of Sea Ray.

Another interesting side issue. Boat building was really something Brunswick was into to sell engines. With stern drives down, this makes sense. But how much of the stern drive business here will they lose with Sea Ray free to use other brands? I'd bet 50% of it eventually.

And, with Sea Ray on the market, Hatteras having been sold, it begs the question regarding Brunswick and boat building. Who is next? The reason I'd guess Sea Ray ahead of Bayliner is that Bayliner sells a lot of outboards.

Not all that much left to support in stern drives and the only remaining boat brand they have with stern drives is Bayliner and Bayliner's volume is in outboard boats now. I would estimate 90% of their boats sold are outboard.

So that leaves Mercruiser to compete in the general market. This could eventually help them there as many builders push Volvo because they don't want to push the engine of their competitor.

Any chance Marine Max buys them I wonder?

My bet is on an upmarket builder that could use a volume line to augment their ability to source components/engines at better prices.

It took them years to sell Hatteras/Cabo. Rest assured they've been trying to locate a buyer. Perhaps gotten offers but not what they wanted. Now, by going public, they hope for multiple bids. I think it's most likely to be venture capitalists because those in the business are more conservative and aren't going to be willing to give the offers that venture capitalists would.

The problem is that all their reasons for selling are reasons to have concerns as a buyer. It's a brand built on I/O's and their sales are dropping every year. Finally they introduced outboards but based on price they couldn't compete with Bayliner. Since many dealers are the same, they order Bayliner outboards and Sea Ray I/O's. They also have no jets. Yet, the number one selling boat in the under 25' range is a jet. I compare them to Chaparral which introduced their Vortex line of jets, their H2O lower priced line and really promoted Robalo, all outboards. So, while the basic stern drive business stuggled, they gained in all other areas.

Now, I also see a lot of opportunities if an aggressive, well financed buyer were to appear. First, expand the outboard offerings and add some smaller and less expensive models. Toss in even some center consoles, not high performance, but family style boats. Then add some jets in the 20-25' range. Offer a choice of engines, Mercruiser or Volvo. Offer a choice of outboards as well. On your larger boats offer more engine options and on pod boats, offer IPS and larger engines that way. Solve your quality control issues on the L Series and expand it. Become less dependent on Marine Max and rebuild your Sea Ray network. Go aggressively against Bayliner and Glastron. Breaking two existing ties could do wonders in opportunities. That is the engine tie with Mercury/Mercruiser/Zeus and the tie with Marine Max and Bayliner. Bayliner goes from your sister to being the enemy and suddenly you have one huge advantage. Bayliner can only offer Mercury and Mercruiser. You can offer all outboards and Volvo I/O's and pods. Even center consoles, you no longer have to worry about stepping on Boston Whaler's feet so offer some small ones and have engine choices there. Then rebuild dealers committed to you, not with such mixed alliances as Marine Max has. Where Marine Max performs, that's fine, but they don't everywhere.

Following PacBlue's ideas.

I would separate the company into profit centers, of course all feeding up to one corporate group. Where possible the profit centers would even have their own manufacturing facilities or separate lines in the main one.

1. Sea Ray runabouts. Increase the number of outboards and go down to 16'. Outboards and I/O's under this umbrella. Must have some very basic low priced entry level models. Perhaps add catamarans.
2. Sea Ray Jets. Comparable to Vortex from Chaparral, competing with Yamaha but better ride.
3. Sea Ray Sundancer. 26-45'. Include outboard sport cruisers like the 32' they have now. Continue to add models with fly bridges. The fly bridge models eliminate the need for Meridian. The 400 Fly is right on target. Deemphasize I/O's and increase straight inboards. Perhaps offer some pods.
4. Sea Ray Yachts. Back from the dead and previous failures. No more L Series. Call them Yachts and expand upward in size. Hybrid, if developed, would fall under this.
5. Sea Ray Fish but some better name. Outboard powered to compete with Robalo and Wellcraft and even Boston Whaler. Not for the fishing professional high end center console customer but for the family. Oh, a wild thought would be to buy the Cabo name.
6. Sea Ray Ski and Wake. Straight inboards aimed at that market. Could even build with an acquisition of a small competitor in that market.
7. Sea Ray Performance. This would come from an acquisition and maintain the existing name, but use Sea Ray's production facilities and ability. Plenty of easily purchased lines that no longer can stand alone but would be nice image boosters. Maybe Fountain or Baja? Or bring back some history and old names. I had a 22' Pachanga during my college years. This would be the least important of anything listed at the present time.
8. Sorry...no ribs. They know nothing about producing ribs.
9. The one other acquisition I wouldn't mind is a pontoon manufacturer.

The odds of someone coming in and being willing to spend the capital to do all that is very slim. Most buyouts are highly leveraged and that doesn't make building a brand easy. I would love to see someone ready to build the company but the odds are against that.

In my opinion, much less than that. I haven't seen the books or anything but I'd value Sea Ray off the top of my head between $100 and $150 million.

The entire boat group sells less than $1.4 billion a year and operating income has been $17, 38, and 61 million the past three years. Total assets of the boat group were around $425 million. My best estimate is Sea Ray's sales are around 1/4 of that total or $350 million.If so, it's operating income perhaps averaging $10-15 million. They probably should be making $35 million or so.

Not that many years ago, Glastron, Four Winns, Wellcraft, Ranger, Stratos, and Champion and a couple more sold for around $50 million and Larson, Carver, and Marquis brought another $10 million.

Sea Ray is worth what a willing buyer will pay but $100-150 million sees like a good price to me for a willing buyer to pay. I'd never go near that amount, perhaps half of it if I was involved in buying.

The death of stern drives.

In 2005, there were 72,000 sold per year in the US, down from 78,000 in 2000. Now there are fewer than 15,000. While all market segments dropped in 2008 and 2009, the other segments have all gained since and stern drives just kept going down. Sea Ray was a stern drive driven company. Slow to react and push outboards, still not jets, slow to bring inboards, gas and diesel, into small cruisers and limited on pods due to the Cummins size limitations.

The purchase of Cobalt would be the best comparable. They would be in the upper range of a purchase price. Cobalt has been profitable even with the drop in stern drives as they are at the upper end and they're more profitable than Sea Ray. Cobalt and Chaparral have been the success stories of the industry.

Correct Craft obviously has been in acquisition mode from engine builders to boats.

Now, could I see someone perhaps stretching it to $200 million? It's always possible, but I definitely don't see it worth it.

Notice, I did say Sea Ray needed a ski and wake boat line. The lakes are full of bass boats, pontoon boats, outboard runabouts, and ski and wake boats. Still some stern drives and some jets but those other type boats are the ones booming.

Here is some information which shows what had happened to Sea Ray in the 24-29' sterndrive market. In 2016, per Cobalt, market shares were:

Cobalt 29%
Sea Ray 15%
Chaparral 14%
Regal 9%

In total, Sea Ray once sold 280,000 boats a year and now sells less than 30,000.

By comparison, Marine Products Corporation (Chaparral and Robalo) sold 5,000 boats last year.

Marine Products estimates the total market 18-33' fiberglass as follows:
Sterndrives 12,000 boats
Outboards 45,000
Inboards 9,200
Jets 2,500

Chaparral claims to be number one in units of 18-33' sterndrives. That is different than the numbers above as Cobalt doesn't compete under 24'. They claim Cobalt is #2, followed by Sea Ray and Bayliner.

Marine Products sales are $241 million, operating income $23 million, net income after taxes $17 million, equity per books $65 million, market cap $518 million. They are by far the most valuable US boat manufacturer in the market Sea Ray is in. They've always been profitable, even when the market collapsed, and pay nice dividends. They, like Malibu, definitely gain value by being public companies. I could see that in Sea Ray's future at some point. Malibu's market cap is now $627 million.

So, the real path to value is to expand and reshape Sea Ray's lineup of boats and to go public.

As an aside, Cobalt did win their suit against Sea Ray for the retractable swim step patent for $2.7 million. I do not know if that has been appealed.

I've read that Searay's sales are 10% of what they were in the heyday. I have been seeing searay bowriders and stuff with outboards on the transom.