Detroit Diesel to Buy Outboard
Reuters Wednesday July 9, 1997 By Kevin Drawbaugh
CHICAGO, July 9 (Reuter) - Outboard Marine Corp talked with several companies over the past 75 days before agreeing to be acquired for $16 per share by Detroit Diesel Corp, Outboard chairman and chief executive Harry Bowman said Wednesday.
``We talked with a number of people from a variety of different backgrounds,'' Bowman said in an interview. ``We had a very good selection of companies. So I was pleased with the way the whole process went.''
Waukegan, Ill.-based Outboard is the largest U.S. maker of outboard engines and second-largest recreational powerboat builder.
In a two-step cash and stock deal valued at $500 million, Outboard agreed to become a unit of a company that manufactures diesel engines for trucks and other equipment.
As for Wall Street speculation that Detroit Diesel might spin off Outboard's money-losing boat business, Bowman said, ``They did a lot of due diligence around the boat business. They apparently came to the conclusion that it was an integral part of their investment here and have decided to make the investment for the whole company and to go forward with the boat business and our boat brands. To my knowledge, that's their decision and direction at this point.''
In a teleconference earlier Wednesday, Detroit Diesel chairman Roger Penske said divestment of the boat business might be considered in the future, but the first priority would be to bring it back to break-even.
Chris-Craft, Four Winns and other powerboats accounted for about 43 percent of Outboard's total 1996 net sales of $1.12 billion. Marine engines, including those sold under the Johnson and Evinrude names, accounted for the rest.
Market conditions in the small-powerboat sector, in which Outboard is focused, remain soft, Bowman said.
``That industry has still been kind of soft predominantly because of the cool and wet weather that we've had up north .... Boat volumes are still skewed toward the larger units, as they were in model year '96, and the smaller boats have been flat to down a little bit year-over-year,'' Bowman said.
Hired by Outboard in February 1995, Bowman said he has had no detailed discussions with Penske Corp, which controls Detroit Diesel, about his personal future after the buyout.
At $16, the buyout price was below the company's Tuesday close of more than $19. Outboard shares Wednesday closed off 3-9/16 at 15-7/8 in reaction to the deal, which some investors called a ``takeunder'' rather than a takeover.
Over the past two years, Bowman has been awarded tens of thousands of Outboard stock options, proxy statements show. He declined to specify their average exercise price, but he said, ``They're all above 16, I can tell you that.''
Greenway Partners -- a New York investment firm that bought a large stake in Outboard last summer when its shares were trading between 15 and 17-1/2 -- played no role in the discussions that led to the Detroit Diesel deal, Bowman said.
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