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Hedge Fund Seeks Spinoff at Company Behind Popular Gym Equipment

Updated on
  • Company to ‘benefit significantly,’ hedge fund says in letter
  • Owl Creek has 3% position in maker of boats, billiard tables

Jeff Altman’s Owl Creek Asset Management is pushing Brunswick Corp. to spin out its fitness business after building an activist stake in the company, which also makes boats and billiards tables.

"Brunswick stakeholders would benefit significantly from a spinoff of the fitness equipment business," the event-driven hedge fund said in a letter addressed to the company’s board. "The marine segment on a stand-alone basis is worth more than the current valuation for all of Brunswick, implying the market assigns negative value to the fitness segment."

Brunswick’s Chief Executive Mark Schwabero said in a statement that he appreciates the dialogue the company has had with Owl Creek over the last several weeks. “Brunswick is always open to constructive input from our shareholders about how we can further strengthen the company,” he said.

The shares rose as much as 7.7 percent on Tuesday and closed at $63.24, up 5.6 percent for their biggest jump in more than a year.

Altman’s firm has built a nearly 3 percent stake in the company, which has a $5.5 billion market capitalization and has been in conversations with the board over the past month, according to the letter. Management has indicated to Owl Creek that it will review the proposal, Altman said in the letter.

‘De-Stagger Board’

Brunswick’s fitness unit includes brands such as Life Fitness and Hammer Strength and makes up a smaller piece of the company, whose marine engine and boat manufacturing business brings in the majority of Brunswick’s $4.7 billion in revenue.

Owl Creek isn’t seeking to nominate anyone to the company’s board right now but it is pushing Brunswick to "de-stagger the board" to ensure that the company’s directors will be elected annually, according to the letter.

Mettawa, Illinois-based Brunswick’s stock price had climbed 1.2 percent in the past year before Altman sent the letter, compared with a 25 percent advance for the S&P 500 index. Just last month, the company announced plans to sell its Sea Ray brand, which was a part of its boat group.

Owl Creek also says that a separately traded fitness business would command a public market premium.

Owl Creek has profited from spinoffs before. The hedge fund bought a stake in pest-control business ServiceMaster Global Holdings Inc., which spun off its American Home Shield business last year, and has since seen a jump in its share price.

That position along with some other timely bets in the distressed-debt market helped drive Owl Creek’s returns last year, with its flagship fund posting a 21 percent advance for 2017.

— With assistance by Dan Wilchins

(Updates with Owl Creek performance details in final paragraphs.)
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