Brunswick Corporation's board of directors has decided to spin off its fitness business, represented by Life Fitness, Cybex, Hammer Strength, the Indoor Cycling Group and Scifit. FitnessCo, a new public company whose name will be formally announced at a later date, will incorporate these brands and the Brunswick Billiards business. The iax-free distribution of the new company's shares to Brunswick's shareholders is expected to be completed by the first quarter of 2019.
On an adjusted basis, FitnessCo had an operating margin of 10.7 percent last year on sales of $1.03 billion, and its profitability is expected to remain similar this year. The company will continue to be based in Rosemont, Illinois. It will be led by Jaime Irick, currently president of Brunswick's fitness division.
The balance of the group's operations, consisting of the marine engine and boat segments, had sales of about $3.5 billion last year. It will continue to trade as Brunswick on the New York Stock Exchange. It will still be based at Mettawa, Illinois and led by Mark Schwabero, chairman and chief executive of the whole group.
One of Brunswick's minority shareholders, Owl Creek Asset Management, had called for the divestiture of the fitness division, which represents only 20 percent of the group's Ebitda, arguing that Brunswick would be worth more on the stock exchange without its fitness equipment operations. It noted that there are no synergies between the two segments.
Owl Creek, which owns about 2.8 percent of Brunswick's shares, said a stand-alone fitness company would command higher premiums. It pointed out that Technogym has a price/earnings ratio of 28.
In announcing the spin-off, Brunswick's board said that it will allow shareholders to value and invest in two different companies, each of them focused on its sectors, with enhanced strategic opportunities and flexibility to drive growth.
Brunswick claims its fitness segment has the “largest global footprint of any commercial fitness equipment manufacturer,” with a strong brand profile, leadership in technology and the broadest product mix.
Moody's reacted to the announcement by saying that it would review Brunswick's debt rating because the spin-off will expose the group's remaining marine business to swings in discretionary consumer spending as opposed to the more stable fitness business.
