Today, Island Capital Group LLC released an open letter to the shareholders of MarineMax, Inc. (NYSE: HZO). The full text of the letter follows:

July 9, 2024

Dear Shareholders of MarineMax, Inc.,

I am writing on behalf of Island Capital Group LLC (“ICG”) (www.islecap.com), a real estate oriented private equity and merchant banking firm of which I am the founder, chairman & CEO. I am also the founder and former Chairperson of Island Global Yachting (“IGY”), a company I built, from scratch, over an approximately 20 year period and sold to MarineMax, Inc. (NYSE: HZO) (“MarineMax” or the “Company”) in 2022. 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.

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 the less than two years following the sale, based on publicly available information, the following has occurred:

  1. the Company has successively reduced its fiscal year 2024 Adjusted EBITDA and Adjusted EPS guidance twice in its last two quarters of earnings releases, with Adjusted EBTDA down a total of 27% and Adjusted EPS down a total of 43% compared to its initial guidance for the year;
  2. no new assets were acquired by IGY while competitors have raised capital and developed and acquired assets, putting IGY’s competitive advantages at risk;
  3. the Company has failed to advance any of the growth initiatives IGY highlighted in its sales process; and
  4. Tom Mukamal, who I hired and who successfully led IGY as CEO from 2010 to 2023, left IGY.

The acquisition of IGY has not enhanced MarineMax’s valuation or provided any meaningful uplift to the Company’s share price. In fact, prior to the June 2, 2024 news of a rumored acquisition of the Company by OneWater Marine Inc. (“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.

We believe that the YMRS Business is not a key focus of management. The MarineMax management team does not spend a meaningful amount of time discussing these assets on its earnings calls. The Company’s investor materials also reflect the view that this portfolio is an afterthought. Furthermore, there are no meaningful synergies between the retail boat business and the YMRS Business. The YMRS Business is a real estate and luxury services business, whereas the retail boat business is a product business. The customer bases are completely different.

It is through this lens that I am making an open proposal to acquire up to a 100% interest in the YMRS Business from MarineMax. Based on publicly available information, we believe that this portfolio of assets is not adequately valued by the public market and thus has added no value to you as shareholders. We propose acquiring the YMRS assets at double-digit EBITDA valuation multiple, while the Company currently trades within a 5-6 times multiple range. Thus, our proposal could unlock significant value for shareholders.

A sale of the YMRS Business would provide a substantial amount of cash for the Company at a time when its core business is under pressure, and the proceeds could be utilized in an accretive fashion to repurchase stock, delever the Company and/or pursue acquisitions in the Company’s core business. Additionally, to the extent desirable, ICG is willing to acquire less than 100% of the YMRS Business (although not less than 75%), allowing MarineMax to retain some ownership and potentially benefit from ICG’s growth strategy.

The merits of our proposal include the following:

ICG’s Proposal is high quality, carries low risk and is immediately actionable. Our proposal would value the YMRS Business at a double-digit EBITDA multiple (significantly above MarineMax’s current trading levels), does not have any conceivable antitrust risk and could provide the Company with an ongoing participation in the potential growth in the YMRS Business (if it retains a minority interest). Furthermore, our proposal would provide MarineMax with substantial cash proceeds that could be allocated to accretive initiatives, including but not limited to share buybacks at relatively depressed trading levels, strategic M&A and/or balance sheet deleveraging. These initiatives could create significant value for shareholders. In contrast, the rumored transaction with OneWater may undervalue MarineMax as a whole and would also carry significant contingencies and regulatory risk.

ICG has a growth strategy for the YMRS Business and has access to a lower cost of capital investor base. In a potential partnership between ICG and MarineMax, the YMRS Business would benefit from the deep and longstanding industry and governmental relationships upon which IGY was built. We have identified several acquisition and growth opportunities that would dramatically enhance IGY’s network.

MarineMax has not created value in the YMRS Business. Regrettably, MarineMax has not been able to achieve any significant growth initiatives as stewards of IGY. Meanwhile, competitors have expanded their portfolios and have raised capital to fund acquisitions, potentially encroaching on IGY’s leading network and brand.

MarineMax still owes ICG and affiliates an earnout payment. ICG and its affiliates continue to hold a material financial interest in the Company, with an earnout payment due in less than a year, which is carried at $67.7 million on the Company’s balance sheet as of its most recent 10-K (dated September 30, 2023). This could be favorably resolved as part of this proposal.

ICG, as the former controlling owner of IGY, has minimal execution risk to complete the proposed transaction and can move with tremendous speed. Based on this historical ownership, ICG has intimate familiarity with the IGY portfolio, its management team and the legal framework in which IGY operates, all of which make ICG the best party to quickly execute a transaction. There is no potential acquirer or investor who could move more quickly and deliberately than could we.

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

Respectfully,

Andrew L. Farkas Managing Member, Chairman & CEO

For Island Capital Group LLC Mike Geller mgeller@prosek.com