M&A Watch: Should Bass Pro Shops Acquire Brunswick?

I was asked recently what I thought about the possibility of Bass Pro Shops acquiring struggling boat and recreational products maker Brunswick Corporation. I would be very supportive.

With Brunswick's stock in the tank it's certainly a good time to buy. But the strategic opportunity is what's most intriguing. Retailer-owned Corporate Brands are becoming a more popular and attractive growth path in sectors dominated by 'sleeper brands' and slow-moving independent national incumbents. It would appear that the recreational products marketplace, and boating specifically, would benefit most from a shake-up in its go-to-market models.

Here's some interesting background on why a Bass Pro-Brunswick marriage might make sense. Consider the current mood at Brunswick as reported in a June 30, 2008 Plastics News article by Rhoda Miel:

The sluggish U.S. economy is prompting recreational boat builder Brunswick Corporation to shutter most of its fiberglass-boat production for the month of July, while the firm also prepares to close four plants for good by the end of 2009. Brunswick already has cut eight other plants from its North American manufacturing, through sales of noncore brands and by closing other plants.

"Simply stated, in light of the well-known difficult economic conditions existing, we are downsizing Brunswick so we can be profitable even if these conditions continue, and be positioned to grow earnings when conditions improve,'' said Chairman and Chief Executive Officer Dustan McCoy. "We believe it prudent to plan as if no catalyst for growth exists...'' he said.

And then compare that to the mood at recreational powerhouse Bass Pro Shops, whose optimism was recently reported on by Sarah Butrymowicz and Jayne O'Donnell in USA Today earlier this month:

The line between retail and entertainment blurs further among such stores as Adrenalina and Bass Pro Shops. About 30% of each of Bass Pro Shops' 50 stores are dedicated to a theme associated with its location, bringing in elements of a natural-history museum, an art gallery and an aquarium. Each store is singular, from the Florida shop that features the hull of a sunken ship to a 30-foot-long blue whale displayed in Massachusetts. And each receives more than 3 million visitors a year, the company says.

Bass Pro Shop stores have assumed the status of a tourist destination, the company says, and some people are spending vacations driving from store to store. Malls, or even whole cities, will often help pay for construction, investing in the store to help attract customers as well as other retailers. Bass Pro Shops typically pays the money back over time through rent. "A lot of malls come to us to be the anchor for them, like a Sears or a Penney's used to be," says Larry Whiteley, manager of communications for Bass.

We're bullish about Bass Pro using this buyers' market to buy Brunswick and use the assets to create a product development and brand engine. They clearly have the skills and competencies that this industry craves - and are best positioned to create an alternative to the broken boat dealer go-to-market system.

But most importantly, consumers would relish a little more fun and entertainment in the category!