SuperyachtNews.com - Business - Island Capital moves to buy back IGY

By SuperyachtNews

Island Capital moves to buy back IGY

Andrew Farkas has written a letter to MarineMax shareholders proposing to purchase IGY Marinas, N&J, and Fraser  …

Island Capital’s (ICG) Chair and Chief Executive, Andrew Farkas, proposed to buy up to a 100% stake in Island Global Yachting in an open letter to MarineMax shareholders on Tuesday (9 July). MarineMax shares subsequently rose on Wednesday (10 July).

IGY was founded by Farkas and sold in 2022 to MarineMax. Now, the executive claims the marina group is losing its competitive edge, with waning benefits to its shareholders. Furthermore, he claims that if this deal were to be approved, it could be cleared within 60 days.

“We are in receipt of the letter from Island Capital Group and will review it,” a MarineMax spokesperson tells SuperyachtNews. “The MarineMax Board of Directors is open-minded and regularly evaluates bone fide opportunities to enhance shareholder value. We will continue to make decisions and take actions that we believe are in the best interest of the Company and our shareholders.”

“During the time I ran the business, I oversaw the acquisition and development of every single marina in the IGY portfolio, the negotiation of every management agreement, and the hiring of nearly every employee. As a result, my knowledge and understanding of IGY, its businesses, its venues, its platform, and the opportunities presented by it are second to none,” says Farkas in the open letter.

“At the time of the sale, I believed, and continue to believe, that there are synergy benefits to the combination of IGY and MarineMax’s yachting and marina-related services businesses, including Fraser Yachts and Northrop & Johnson (collectively with IGY, the ‘YMRS Business’). I had every reason to believe that IGY would thrive under its new owner.

However, in less than two years following the sale, several significant developments have occurred that Farkas claims have not benefitted MarineMax shareholders. MarineMax has reduced its fiscal year 2024 Adjusted EBITDA and Adjusted EPS guidance twice in the last two quarters, with Adjusted EBITDA down 27% and Adjusted EPS down 43% compared to the initial guidance for the year.

Farkas also claims that no new assets have been acquired by IGY, while competitors have raised capital and developed and acquired assets, putting IGY’s competitive advantages at risk. He also states that the firm has failed to advance any of the growth initiatives IGY highlighted during its sales process. Lastly, Farkas notes that Tom Mukamal, who was hired by him and successfully led IGY as CEO from 2010 to 2023, has left IGY.

“The acquisition of IGY has not enhanced MarineMax’s valuation or provided any meaningful uplift to the company’s share price,” continues Farkas. “In fact, prior to the 2 June 2024 news of a rumoured acquisition of the company by OneWater, MarineMax’s share price was approximately 25% lower than where it was at the time of the IGY transaction announcement.

“Further, MarineMax currently trades at a similar valuation to OneWater, its largest competitor, which does not even have a business equivalent to the YMRS Business. Thus, the acquisition of IGY has done nothing to distinguish MarineMax from its competitors.”

Farkas alleges the YMRS Business is not a priority for MarineMax management as it receives little attention in earnings calls and investor materials. The YMRS Business focuses on real estate and luxury services, unlike the retail boat business, which has a different customer base.

Farkas proposes buying up to 100% of the YMRS Business, believing these assets are undervalued and have not benefited shareholders. He offers a higher valuation compared to MarineMax's current market value, which could provide significant value for shareholders.

ICG’s proposal is “high quality, low risk, and immediately actionable”. It values the YMRS Business at a double-digit EBITDA multiple, significantly above MarineMax’s current trading levels, with no antitrust risk. MarineMax could retain a minority interest, benefiting from the YMRS Business's potential growth. The proposal could provide MarineMax with substantial cash proceeds for share buybacks, strategic M&A, or balance sheet deleveraging. In contrast, the rumoured transaction with OneWater may undervalue MarineMax and carry significant contingencies and regulatory risks.

MarineMax allegedly still owes ICG and its affiliates an earnout payment of $67.7 million due within a year. This could be resolved favourably as part of this proposal. As the former controlling owner of IGY, ICG has minimal execution risk and can complete the proposed transaction quickly. ICG’s familiarity with the IGY portfolio, management team, and legal framework makes it the best party to execute the transaction swiftly and effectively. No other potential acquirer or investor can move as quickly and deliberately as ICG.

“ICG is seeking to engage with MarineMax immediately,” concludes Farkas. “A transaction could be completed in as little as 60 to 90 days, and we stand ready to commence a dialogue with MarineMax’s management and board of directors about any aspect of our proposal.”

SuperyachtNews has contacted industry stakeholders for comment and will update the story as more information becomes available.

 

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