Bidding to refloat bankrupt Genmar begins at $55M

The contest for capsized boat-maker Genmar Holdings Inc. has officially begun.

Platinum Equity LLC, a private equity firm in Beverly Hills, Calif., has placed an opening cash bid of $55 million for the Minneapolis manufacturer, whose lineup of 13 brands includes fishing boats, cabin cruisers and yachts. The so-called stalking horse bid, disclosed Monday in documents filed in U.S. Bankruptcy Court in St. Paul, is the critical first step in Genmar's asset sale. All bids are due Jan. 4; the auction is set for Jan. 7.

A stalking-horse bid is the offer a bankrupt company chooses to kick off an asset sale, setting a minimum so it doesn't get lowballed. It's a way to test the market, the way hunters used to hide behind their horses to conceal their approach.

Platinum Equity will be bidding against Minnesota business titan Irwin Jacobs, Genmar's former CEO, who resigned last month to avoid a potential conflict of interest should he jump into the auction. Jacobs confirmed Monday that he will bid on the company he has captained for three decades -- once one of the largest recreational boatmakers in the world -- but wouldn't say for how much or for which parts. He remains Genmar's largest shareholder, with about 40 percent of its shares. The Pohlad family owns about 15 percent, Jacobs said.

"I don't want to give my strategy out at this point," Jacobs said. "I feel bad for the people at the factories not knowing what's taking place."

Minneapolis-based Genmar, whose brands include Glastron, Ranger and Wellcraft, filed for Chapter 11 bankruptcy protection in June, blaming the effects of the recession and credit freeze.

Platinum's $55 million offer is for more than half of Genmar's assets, said Stephen Spencer, Genmar's bankruptcy adviser at Houlihan Lokey Howard & Zukin Capital Inc. It's bidding to acquire Genmar's Ranger, Stratos, Champion, Wellcraft, Four Winns, Larson and Glastron boat brands, some manufacturing plants and other assets, Genmar said.

Spencer called Platinum's $55 million bid "very positive" and said he'll continue to market the excluded brands.

Mark Barnhill, principal of Platinum Equity, said the company won't discuss prospective acquisitions. Platinum has acquired some 100 companies with aggregate annual sales of $27.5 billion, he said.

Genmar's Chapter 11 petition listed assets of $237.5 million and liabilities of $216.5 million. It owes secured lenders Wells Fargo Bank, Fifth Third Bank and Textron Financial Corp. about $75 million, according to the petition.

Houlihan Lokey marketed Genmar to 80 private equity funds, hedge funds and other potential buyers and had 12 letters of intent by the end of September, court documents filed Monday show. Platinum will receive an expense reimbursement or a break-up fee ranging from $1.5 million to $2.5 million if it doesn't win.

In an interview, Jacobs said his bid will include Genmar's plants in Little Falls and Pulaski, Wis., as well as the stock of VEC Technology, among other things.

Genmar's sales peaked over $1 billion in 2006, but by the time it filed bankruptcy, annual revenue had plunged to an estimated $460 million. The bankruptcy doesn't include Genmar subsidiary VEC Technology, but does include VEC Technology's stock, which is largely owned by Genmar, Jacobs said.

VEC Technology has developed a sophisticated type of fiberglass manufacturing technology. Jacobs had planned for VEC to get into the wind energy business, making blades for turbines. But the company has stalled and needs more capital, he said.