For a private equity firm that bought, rebuilt and sold an iconic brand, the perfect deal materialized when it wasn’t even looking — proving the importance of patience and readiness.
When Stellican Ltd., a group of investors led by Steve Heese, bought the tangible assets of Chris-Craft, the iconic Sarasota-based boat manufacturer, the game plan was to make a quick buck by liquidating what was left of the company.
That plan was hatched in 2001. Seventeen years later, after weathering a recession that devastated the recreational marine industry, Heese finally completed the plan, selling Chris-Craft in June to another iconic American company: Winnebago Industries Inc. The price, not disclosed publicly, is thought to be in the $420-$480 million range, according to estimates in Soundings Trade Only, a marine industry B2B publication.
“We knew how cyclical the marine industry is,” Heese says. “We should have sold in 2006 or 2007, when demand was off the charts."
Why the wait? While a flip was the goal, turns out Heese, in survival mode, grew to value Chris-Craft for something more than a commodity. “In most other cases, we were flippers,” he says. “Buy it, fix it, sell it. But this business, we had owned since 2001 … it becomes an extension of you. It’s like your family, your children. It’s the people who have worked so hard for you all of those years.”
Heese, who remains with Chris-Craft as president and CEO, talked about the anatomy of the deal with Winnebago at a recent Association for Corporate Growth event in Tampa.
“I feel like we built the company twice during this timeframe,” says Heese. He also learned some valuable business lessons about perseverance, as well as belief and trust in a process.
Heese says the up-down-and-up-again years with Chris-Craft also taught him that powerful, aspirational brands like Chris-Craft aren't built overnight, nor are they destroyed quickly — they retain their influence.
"One of the things [Heese] has really focused on is quality," says Dave Felman, an attorney with Hill Ward Henderson in Tampa, the firm that helped negotiate the sale to Winnebago. "And that has made Chris-Craft a truly unique product within the boat market."
PIECE BY PIECE
Chris-Craft had been a stalwart, desirable brand since 1874, drawing marquee buyers such as Dean Martin, Frank Sinatra and Elvis Presley. But as the 20th century came to a close, the company fell into a downward spiral. Sales slowed as Chris-Craft switched from wooden to fiberglass boats, and the corporate entity itself was in disarray thanks to the brand name and trademarks becoming separated from the manufacturing business in Sarasota.
In a bizarre twist, the trademarks became part of Rupert Murdoch’s News Corp. media empire, which agreed to sell the intellectual property to Stellican for $5 million. Heese, in the early 2000s, had the pieces in place to revive Chris-Craft.
The bad news? His timing was awful.
Tough decisions became the norm. As the recession took its toll, 40 workers lost their jobs in Sarasota, and Chris-Craft was forced to shutter its facility in Kings Mountain, N.C., resulting in another 40 layoffs. But Heese wasn’t ready to quit.
“We refinanced our debt and did a deal with our bank to hang in there with us,” Heese says. “And slowly but surely, demand rebuilt.”
One of the company’s keys to survival, Heese says, is its global cachet. “We sell all over the world, and Europe really carried us” through the recession. From 2001 to 2010, international buyers buoyed the brand, accounting for anywhere from a quarter to half of all sales. That allowed Heese and his team some margin for error as they worked to repair the Chris-Craft image — an experience he likens to being in “Startup 101” class.
“We repositioned the product at the very top of the market,” Heese says. “It’s resonated with consumers.”
Heese has some experience with iconic brands, and that one part art, one part science, of making old new again.
Proof? Look no further than Stellican's 2004 purchase of the brand and trademarks of the venerable Indian Motorcycle company, which was established in 1901 — two years before Harley-Davidson — but went bankrupt in 1953 and was liquidated in 2003.
“Indian remains among the most powerful brands in the U.S. motorcycle market,” Stellican founding partner Stephen Julius stated at the time of the acquisition, in 2004. David Wright, another partner at Stellican, called the Indian deal “a tremendous opportunity to revive a great American brand, and we intend to do exactly that.”
Their words rang true, and in 2011 a suitor for Indian came calling in the form of Polaris Industries, a maker of recreational ATVs and snowmobiles. Also, a blueprint for the handling of Chris-Craft had been established.
By returning Chris-Craft to its roots in luxurious, mahogany boats aimed at high-end buyers, Heese helped the brand regain its footing — to $60 million in sales in 2017.
The company’s resurgence — and a growing trend toward consolidation in the marine industry — attracted multiple suitors. But having seen Chris-Craft through some of its darkest days, Heese was of no mind to sell, at first. He instead saw an opportunity to extend the brand into an entirely new market: recreational vehicles.
“We refinanced our debt and did a deal with our bank to hang in there with us. And slowly but surely, demand rebuilt.” Steve Heese, president and CEO of Chris-Craft
Much like its marine brethren, the RV industry has been on a sharp upswing with the improved economy. Wholesale shipments have increased for eight consecutive years, and Winnebago, in particular, has done well, with revenue rising 58%, from $975 million in 2016 to $1.55 billion in 2017.
Flush with cash, Winnebago also sought ways to expand and diversify its brand with “a broader, more balanced portfolio of products,” as Winnebago President and CEO Michael Happe put it in a press release announcing the Chris-Craft acquisition. “We see significant intersection between the RV and marine lifestyles … with similar customer demographics and significant ownership crossover.”
And according to Winnebago’s internal research, some 30% of boat owners also own RVs. Were Winnebago and Chris-Craft on a predetermined path to merge? In hindsight, it certainly looks that way. But Heese says that wasn't the case.
“I went to Winnebago with a design for a Chris-Craft RV because we knew we couldn’t build it ourselves,” Heese says. “The company wasn’t for sale, and I didn’t intend to sell.”
The deal with Winnebago wasn’t a slam-dunk. “They beat the bushes really hard,” says Heese. Winnebago, he adds, was a sophisticated buyer “with deep pockets and a sledgehammer.”
In other words: Winnebago had leverage.
But Stellican also had some aces. For one, the firm’s solid track record of buying, holding onto and reviving premium heritage brands like Indian and Chris-Craft, not to mention Italian yacht maker Riva, which it sold in 2000 to the Ferretti Group, signaled to Winnebago that Stellican, having put in the hard yards with Chris-Craft, was not looking to wheel and deal for a fast buck.
“We’re not value-brand people,” Heese says. “I don’t think we’d be very good at that. We are high-style, high-quality, super-premium people in our hearts. That’s what we know how to do. We’re not going to compete on price with anybody.”
Heese says he saw those same priorities in Winnebago, which has persevered in the turbulent RV industry since 1958 while making few concessions on quality and pricing.
Yet the conversation started from the standpoint of a strategic alliance — not necessarily a deal. “There was nothing like [the proposed Chris-Craft RV] on the market,” Heese says. “I asked if they would be interested in building it and selling it under our brand name. They didn’t say ‘no,’ although that was a year and a half ago.”
The Chris-Craft RV never materialized, but a series of high-level conversations did. The negotiation process became protracted, Heese says, because of the loyalty he developed to Chris-Craft and its employees.
Winnebago’s offer for Chris-Craft stipulated that the company would remain in Sarasota, But Heese pushed for more — demanding Chris-Craft employees be awarded Winnebago stock as part of the deal — and got it.
“They basically checked every box,” Heese says. “We felt really good about selling our company to them, so we put a price on it. We had done a lot of these kinds of deals so we knew what it was worth, and then we went higher. They didn’t even try to go back and negotiate on price.”