Dometic is one of those company names that you rarely hear about, but it makes all sorts of things for boats including the ubiquitous SeaStar outboard hydraulics and digital controls, joysticks, jack plates, trim tabs, steering tilt devices, water heaters and more. This is a just another example of consolidation that is going on in the marine industry among OEMS that are the primary suppliers to boat builders. Now, our guess is that we’ll be seeing Igloo popping up more and more on the boats we buy.
Dometic completed its $667 million acquisition of iconic brand Igloo from the private equity group ACON Investments that was announced in late September. The transaction was closed on October 26 after regulatory approvals had been completed. Cost synergies will generate more than $50 million a year for the Swedish company, it is reported.
Igloo is a global provider of passive cooling boxes and drinkware products for the outdoor market. Founded in 1947, Igloo is perceived as one of the leading manufacturers in the world with an iconic brand, a wide product range and strong consumer orientation.
With 92% of net sales in the US and products available in more than 90,000 retail stores globally, Igloo also has its own fast-growing direct to consumer sales channel. With its own manufacturing facility in Texas, products are primarily manufactured inhouse giving cost benefits, flexibility, and short lead-times for the North American market. Igloo has 1,100 employees and is headquartered in Katy, Texas.
Acquisition Fits Dometic’s Strategy
The acquisition of Igloo is a major step in Dometic’s strategy to continue grow in the attractive outdoor industry and creates a strong base for further growth globally. It also strengthens Dometic’s offering and distribution network for the North America outdoor market.
"I am excited to welcome Igloo and its employees to Dometic. This acquisition is in line with our strategy to position Dometic as a more consumer driven, less cyclical company in the fast-growing outdoor business. North America is the largest market for cooling boxes and outdoor products, and with Igloo’s strong brand recognition, consumer knowledge and local manufacturing capabilities, we are getting the necessary tools to further drive our sales and margin expansion." says Juan Vargues, President and CEO of Dometic.
"Igloo has shown strong sales growth, market share gains and margin improvements in recent years, driven by both commercial and operational initiatives. Further sales and cost synergy activities will be implemented to generate continued improvements." Vargues continued.
Dometic acquired Igloo for $677 million, on a cash and debt free basis. In addition, the agreement includes an earn-out element of maximum $223 million to be realized depending on the future EBITDA development of Igloo.
The transaction is expected to be accretive to Dometic’s EBIT and EPS in 2022. The transaction is expected to generate sales synergies of $150 million per annum from a strengthened combined sales platform, and cost synergies.
The acquisition is financed by internal funds. The net debt / EBITDA ratio impact from the transaction is expected to be 1.3 times. At the end of June 2021, Dometic had a ratio of 1.4 times. As previously communicated, the target is a leverage ratio of around 2.5 times over a business cycle.
Igloo will continue to operate under its existing brands and be reported as part of Dometic’s segment Global.
Typically, most acquisitions produce cost savings through eliminating duplicate positions in sales, marketing and accounting. For Dometic, it sees a yearly saving of $5 million because of supply chain and distribution efficiency improvements.
Total annual improvements on EBITDA of approximately $50 million, are expected to be realized within five years.
“I am extremely proud of everyone on our team who has worked so hard in building Igloo into an iconic American brand.” says Dave Allen, President and CEO of Igloo Products Corp. “As part of the Dometic Group, we look forward to combining our resources in order to accelerate innovation and growth across the globe.”
ACON Investments bought Igloo Products in 2014 from J.H. Whitney, a Connecticut-based private equity firm. ACON had privately explored selling the brand, analyst said, reaching out to Dometic and outdoor goods manufacturers.
The global market for cooling boxes and drinkware is a growing $8 billion market fueled by the outdoor trends visible across the world. Igloo has been No. 1 in this market in the US. Combined with Dometic’s global presence and product offering of both active and passive cooling boxes, drinkware and fast-growing range of other outdoor products, the acquisition is expected to create a strong base to further grow in the outdoor segment.
It will also reduce sales cyclicality for Dometic, as it broadens the sales exposure from “high ticket discretionary spend” to ”low ticket discretionary spend.”
"Our strategy for profitable expansion is built on a combination of organic and acquisitive growth. This is our eighth acquisition this year and our pipeline of potential future acquisitions remains strong," said Dometic’s Vargues.