The Genmar/FLW Saga Explained (Part 2)

Since the 6/1/09 bankruptcy filing of Genmar Holdings (often referred to as the GM of the boating industry), many additional stories have developed and many events have unfolded.  With the potential sale of Genmar to be announced next week, let's take a look at how we got to this point.

6/1/09 - Genmar Holdings (under the leadership of Irwin Jacobs) files for bankruptcy protection.  Frozen credit markets and the worst business conditions in years are to blame.  The Chapter 11 filing is an effort by Genmar to reorganize their company so they can continue to meet obligations to banks and other lenders.

7/1/09 - Genmar formally petitions the court to allow them to honor outstanding Ranger Cup bonuses, warranty claims, and rebate claims.  Ranger came out of the gate with perhaps their most important point or argument...our involvement with tournament circuits and tournament anglers is the most important marketing tactic we have.

7/7/09 - Genmar's motion was approved, and Textron's objection was overruled.  The courts moved to allow payments of $140K in sportswear certificates (Ranger Owners), $245K in Ranger Cup bonuses (FLW Anglers), $26K in pro-staff obligations (mostly FLW Anglers), $30K in sponsorship advertising (FLW Outdoors), and $500K in prize boat certificates (FLW Anglers).  If you take a look at Genmar's priorities, they disbursed money to FLW Outdoors and FLW anglers before anything else...again stating the importance of Ranger's involvement with FLW. 

8/1/09 - Rumors that Wal-Mart may begin to sever it's relationship with FLW Outdoors begin to gain momentum.  Shrinking tackle sections in Wal-Mart stores, the departure of Wal-Mart's CEO (who helped create the Wal-Mart/FLW relationship), and the absence of a traditional tour stop next to Wal-Mart's HQ further speculation that FLW may be losing major sponsorship dollars.  With it's major boat sponsor in bankruptcy court and it's major retail sponsor rumored to be leaving, the future of FLW Outdoors seemingly takes a turn for the worse.  Major sponsors help to drive up tournament winnings...sponsor loss = smaller prizes.

8/11/09 - FLW sues Evinrude for non-payment of sponsorship dollars.  Genmar owes Evinrude money, and Evinrude owes money to close Genmar associate FLW Outdoors.  Whether or not the two situations are related is not for sure.  What is for sure is that the situation for FLW continues to look worse and worse.  When you're rumored to be losing major sponsors, the last thing you need is friction with a current sponsor who's return and continued support is probable.

9/16/09 - Unable to meet the deadline set forth by the court and creditors, Genmar seeks an extension.  3 1/2 months after the initial bankruptcy filing, Genmar petitioned the court to extend their reorganization period by 2 months.  In bankruptcy proceedings, the company must come up with a plan, present it to the creditors, gain acceptance, and move forward with it.  During this initial period, Genmar is the only party who can come up with a plan.  After the initial period is expired, any company involved can develop a plan and things begin to get more complicated than they already are.  The typical outcome after the period has expired is usually a sale of the bankrupt company or a liquidation of the company's assets...the company is sold of in pieces and the individual entities may or may not continue to operate.

9/30/09 - Genmar's motion to extend their reorganization period is approved by the courts. 

10/2/09 - FLW's expected announcement of their full 2010 schedule is delayed.  With the future of Ranger boats up in the air and the future commitment of FLW sponsors up in the air, FLW is unable to determine what they will be able to offer.

10/6/09 - FLW Angler of the Year race sponsor and pro-team sponsor Land O' Lakes ends their 13-year relationship with FLW.  The hits just keep coming.

10/8/09 - In a PR move designed to reach new audiences, FLW Tour co-angler Justin Lucas is set to appear in a segment on the Today Show. 

10/12/09 - One of FLW's newer sponsors, Goodwill Industries, has good things to say about it's relationship with FLW.  While they would not confirm they were returning as a sponsor, their positive comments in the media were the first in a long time for FLW Outdoors.

10/27/09 - After nearly a month of speculation, FLW Outdoors announces their full 2010 schedules.  Notable changes included the cancellation of the Eastern FLW Series, the consolidation of Stren tours from 4 to 3 events, and the absence of a Stren Series Championship.

10/28/09 - Title sponsor of the Stren Series and large FLW Sponsor Pure Fishing (Abu Garcia, Berkley, etc) announces it will not be continuing it's relationship with FLW.

10/28/09 - FLW CEO Charlie Evans attempted to connect with fans by answering questions about the changes for 2010.  People hoping for answers were disappointed as the discussion revealed little other than FLW's efforts to cut costs in order to continue the existence of the tour. 

10/30/09 - Unable to successfully reorganize, Genmar announced that it would like to pursue a sale of the company.  Genmar announced that they had identified a potential buyer but included language in the motion that would also allow Irwin Jacobs to match or better any offers for the company as long as he was operating as an individual and not a representative of Genmar.  While Jacobs obviously has a large personal interest in controlling Ranger so he can continue the Ranger/FLW relationship, the language would seem to indicate that the potential buyer is not Jacobs.

11/3/09 - The creditors in the Genmar bankruptcy announce their public support of the sale process.  At the same time, the most vocal of the creditors, Textron Financial, requested more information on the potential sale.  Specifically, the wanted to know the identity of the potential buyer in order to determine if the potential buyer was interested, and to better gauge whether or not they would recoup any money owed to them by Genmar.

11/3/09 - Irwin Jacobs made his plans known to the public.  In an interview with a major boating industry media outlet, Jacobs stated, "I plan to be the high bid.  That's my plan."  Not only does Jacobs announce his intent to control Genmar, but in the interview he also indicates specific future plans for the company.  Given his history of aggressive business practices, such a statement would seemingly mean that Jacobs will ultimately end up with Genmar and continue the FLW/Ranger relationship.

11/4/09 - In the largest announcement to date for FLW, they ink a major sponsorship deal with Cabelas.  The deal includes sponsorship of all levels of FLW competition, as well as a contingency program of anglers similar to the Ranger Cup.  Rumors of such a deal had been floating around for a while.  With a new major sponsor and an owner who is trying to buy their most important partner, things are finally looking up for FLW Outdoors.  

11/5/09 - US Bankruptcy court agrees to allow Genmar to enter into an exclusive period with the (still unnamed) potential buyer.  No light has been shed on the identity of the potential buyer, but the court's approval establishes that the buyer is, A) interested, and B) in a position to actually purchase all or part of the company.

11/10/09 - FLW inks yet another big-time sponsor...Rapala.  In a matter of 2 weeks, FLW was able to fill the sponsorship void left by the departure of Pure Fishing.  One Jacobs-controlled company (Genmar) owes Rapala money, but they enter into a sponsorship with another Jacobs-controlled company (FLW).  Such a move would indicate the continued control of both companies by Jacobs.  The deal is believed to be or could be a trade-out against the monies owed by Genmar to Rapala, and if control of Genmar would fall to someone other than Jacobs, the other party would be much less likely to agree to a deal that benefits Rapala and FLW, but does not benefit Genmar.

11/11/09 - Irwin Jacobs steps down as the CEO of Genmar Holdings.  If you run a company that you're trying to buy, the courts will not allow you to set your own price.  Jacobs move to step down is the strongest indicator to date that he is the party trying to buy the company out of bankruptcy.

11/11/09 - FLW Outdoors asks the courts to have Genmar return 46 motors currently in Ranger's possession.  For those of you who don't fish, motors aren't cheap.  Most of the outboards in question are valued around $8K a piece...making this a $400K move.  Such a move would protect FLW if Genmar were to fall into someone's hands other than Jacobs.  Either Jacobs was trying to protect FLW, or he was trying to devalue the company he was trying to purchase and make the deal sweeter for himself.  Either way, the creditors objected to the motion on 11/13, and FLW withdrew the motion on the same day, which would indicate Jacobs is trying to stay on the creditors' good side.  

11/17/09 - In an announcement that surprised many, FLW and Evinrude settled their lawsuit out of court and Evinrude renewed it's commitment as a sponsor of FLW Outdoors.  This move says that Evinrude is confident in both Jacobs and the future of FLW.  The future of FLW is tied to Genmar, who owes Evinrude money.

11/19/09 - As rumors circulate about several new and major sponsors for FLW outdoors, the interim CEO and President of Genmar advises Genmar dealers that a sale will be announced next week.   

As we all sit and wait for the announcement, here's what obvious...

- Nobody has more at stake than Jacobs.  Jacobs owns 40% of Genmar, has developed technologies at Genmar that have enormous future profit potential, and could watch FLW crumble if he doesn't retain control of Genmar and Ranger.  He'd like control of Genmar, but he needs control of Ranger.  He simply cannot afford to lose.

- The continuation of the Ranger/FLW partnership is crucial to the survival of both parties.  If it looked like the relationship was about to crumble, we would see more sponsors departing from FLW and the holes would not be filled.  For almost every major sponsor that has left FLW this year, a new one has appeared in it's place.  Companies both inside the industry and outside the industry believe in the profitability of both Jacobs and FLW. 

- The sale of Genmar to a party other than Jacobs could be very bad for tournament anglers everywhere.  Not everyone gets what we do and if the new owner doesn't understand or believe in the profitability of tournament fishing, the Ranger/FLW relationship could be over. 

The Genmar/FLW Saga Explained (Part 1)

In the 20 or so years I've been letting the green fish rule my brain I've traditionally spent the winter months organizing, accumulating, and re-organizing tackle and trying not to die of cabin fever.  This year hasn't been much different, but there's been a huge story to follow as the future of our sport no longer seems as secure and promising as it used to.  The Chapter 11 Bankruptcy filing in June by Genmar Holdings has brought about a whirlwind of drama, legal battles, and speculation about what's in store for the multi-billion dollar tournament fishing industry.

To understand the situation, it's vitally important to understand the man in the middle, Irwin Jacobs.  Irwin is the long-time chairman and CEO of Genmar Holdings and the founder of one of America's 2 major fishing tournament circuits, FLW Outdoors.  He's been called many things...a genius, an innovator, but mostly a ruthless corporate raider.  A week ago I was explaining the saga to a market-savvy family member and when I mentioned Jacobs he said, "Yeah, I've heard of him...that guy would buy or sell his own mother's soul if the price was right."  Early in his career, Jacobs gained notoriety with a hostile takeover of Brunswick...a move that was said to inspire the "poison pill defense."  He tried to buy the company.  They told him they weren't for sale.  He took out a full page ad in the Wall-Street Journal announcing that he would buy up a majority share of the company's stock and they would no longer have a choice about whether or not they were for sale.  In roughly 30 days he owned over 50% of the company and he was the new chairman.  Jacobs has made a small fortune by forcibly taking over companies and selling off all or part of the company to bolster his own personal balance sheet.

Of all the things he has done, both good and bad, we all owe him a debt of gratitude for a move he made in the mid 90s when he created FLW Outdoors.  His dream was to take a tournament circuit and marry it with companies in the fishing industry as well as outsiders.  Sponsor marketing efforts would result in higher sales, participation would increase, and tournament purses would vault to the level where we see them today.  His reputation as a money-maker helped him get Wal-Mart on board, his control of Ranger Boats (A subsidiary of Genmar) put them in the mix, and his affordable and well-structured tournament circuits created formats and competition levels that had never been seen before.  It's true that FLW was created to help Ranger sell more boats, but at the same time it provided financial opportunities to anglers that were unprecedented.  If B.A.S.S. founder Ray Scott was, "The man who figured out how to get paid to go fishing," Jacobs is the man who figured out how to make professional anglers millionaires. 

Until the 6/1/09 bankruptcy filing by Genmar, it seemed like FLW Outdoors was 10ft tall and bulletproof.  Any company involved in a huge marketing agreement with Wal-Mart could never fail, right?  Wrong.  As with any other US-based manufacturer, the strength of the credit markets determines the strength of the company.  Rangers needs to borrow money to stockpile supplies and build boats.  Boat dealers need to borrow money to put boats on their showroom floor (and they pay back loans when boats sell).  Consumers need to borrow money to put boats in their driveways.  Banks aren't lending money to consumers or businesses so it's getting harder and harder to build, sell, and purchase boats.  If boats aren't moving, Genmar can't pay it's bills, and bankruptcy is the only option they have that can potentially save the company.  

In a Chapter 11 bankruptcy, your creditors needs are put on hold while you try to restructure your company or "trim the fat" so to speak.  You try and streamline, cut costs, and eliminate waste.  This could be something as small as cutting C-level salaries, or as large as liquidating and selling off an entire product line.  You come up with a plan to pay back the people who have loaned you money, and the court system and your creditors decide whether or not they believe in you.  In the event that you cannot figure out a way to reorganize, you move towards a Chapter 7 bankruptcy and you put the company up for sale.  The highest bidder pays a sum of money for the company, the creditors divide it up and cut their losses, and the new owner is largely immune from the bad debt that is left behind.

Since Genmar's filing back in June, many additional story lines have developed and the waters have definitely muddied.  In Part 2 I will give you a timeline spanning from the bankruptcy filing up to today, explain what the different actions and reactions mean (or may mean) and give you my opinions on the potential (and very near) future of the whole situation.