Posted Jul 18, 2014 In: Bowling News
By Bowling.com

By JEFF RICHGELS

There is no way to sugarcoat it: Brunswick getting out of the bowling business is one more hit for the sport, especially in PR.

But it’s not the end of bowling. In fact, there are potential bright spots in the long-rumored announcement made after stock markets closed Thursday.

For those crying that the sky is falling, relax! All Brunswick did was tell you what you already know: Bowling is on the decline and it’s probably not a great business to be in if you’re a publicly traded company looking to maximize return for your shareholders, which is what public companies aim to do.

The bad in that a lot of important people follow what publicly traded companies do and this tells them bowling is in really bad shape, which is something they might not have known.

It was clear from many of the comments I saw on social media that a lot of bowlers don’t know that while Brunswick is a name synonymous with bowling, it’s less than 10 percent of Brunswick’s business — its Marine business is the biggest portion.

Brunswick said in a news release that it has agreed to sell its Retail Bowling business (85 bowling centers) to Bowlmor AMF for $270 million, contingent upon customary closing procedures and with completion of the deal expected in 90 days.

And the company announced its intention to sell its Bowling Products business (balls, machines, lanes, etc.) by the end of 2014; it will continue to operate the business and has hired Lazard to seek a buyer.

Brunswick stated that its current plan assumes that the eventual purchaser will retain both the manufacturing operations and the “talented” workforce of its Bowling Products business.

Brunswick said the Bowlmor AMF offer was unsolicited and called it “a unique opportunity to transfer ownership of this business at an attractive valuation.”

"Brunswick Retail Bowling has long been a solid contributor to our Company, and last year had approximately $187 million in sales,” Chairman and CEO Dustan E. McCoy said in the release. “After careful consideration, however, we concluded that this transaction is in the best interests of our shareholders and the Retail Bowling business.

"The bowling industry has been evolving as center counts decline and the customer mix shifts from predominately league bowling to casual bowlers seeking an entertainment-oriented experience. For Brunswick to drive growth in this business, it would take continual development of new entertainment concepts and significant additional investment to implement these new concepts at new properties or to convert existing centers. We believe directing investments into select portions of our core Marine operations as well as our Fitness business provide better opportunities for greater returns. In 2013, the Marine and Fitness businesses together accounted for 92 percent of Brunswick's net revenues.

"Conversely, Bowlmor AMF's primary strategic objective is to invest in and grow its retail bowling business, which includes proven entertainment concepts in certain of its centers. With the addition of the Brunswick locations, Bowlmor AMF will increase its center count to 343 in North America, and, it will add some of the most dedicated and talented people in retail bowling.”

Later in the release, McCoy stated that "Going forward, we anticipate net proceeds from both these divestitures and associated actions, which reflect our current estimates for taxes and liabilities to be paid, to approximate $270 million to $290 million. We believe our best opportunity to increase shareholder value is to use these net proceeds to strengthen our Marine and Fitness segments. Further, we plan to consider the following: increasing the quarterly dividend, accelerating contributions to the Company's underfunded pension plans as part of our de-risking strategy, and establishing a share repurchase program.

"Our highest priority will be to target investment opportunities in segments such as marine parts and accessories along with those in Fitness. Brunswick already has completed one such investment by acquiring Whale, a leading marine parts and accessories provider, and we anticipate additional acquisition activity in this area.”

I spent a decade covering business news for The Capital Times of Madison and I can guarantee you that if you are a Brunswick shareholder, you are applauding these moves – at least if you agree with McCoy’s analysis. And if you know anything about bowling, it’s hard to argue with it.

All McCoy is saying is that Brunswick can make more money investing in its non-bowling businesses than in bowling.

If you’re a bowler, that probably makes you sad. It might also make you angry. You might be ticked off at Brunswick and you might hate Tom Shannon and Bowlmor AMF and its emphasis on recreational bowling and disdain for serious bowling.

But can you really argue that it isn’t true?

Bowlmor said in a news release that the acquisition further expands its geographic footprint.

"We embrace bowling as an entertainment experience and are focused on elevating bowling as a category, bringing it back into popular culture as well as furthering our commitment to league play,” Chairman and CEO Shannon said in the release. “This acquisition will provide us with a strategic foothold in a number of additional markets while enabling us to further scale our operations and mission by leveraging our strong marketing, employee training and operational infrastructure.”

Bowlmor said the transaction is being financed with a sale-leaseback on a significant pool of real estate and a term loan. Larry Ross, a 38-year bowling industry veteran, will head the Brunswick center operations, which Bowlmor said it plans to operate as a stand-alone entity keeping the Brunswick Bowling, Brunswick Zone, Brunswick Zone XL and Brunswick's brands.

In general, the Brunswick centers are in better shape than the former AMF centers, some of which have been closed by Bowlmor since it acquired AMF. In the cases I've looked into, the closings were quite justifiable from a business sense and also reflect the decline of bowling.

Assuming Bowlmor turns the Brunswick centers more toward recreation and away from serious bowling, there will be negative impacts.

Entities like the PBA and bowling tournament groups and serious leagues will lose possible venues and sponsorship/support.

A huge key will be what kind of buyer — if any — is found for the Bowling Products business. If it’s someone or some entity with a love for the game, keen business sense and deep pockets, it could be a positive.

At the least, you have to assume a buyer will have at least a solid respect for the sport and industry because if they didn’t, why would they spend money buying a business dependent on that industry? I mean, they have to believe they’ll be able to make a profit selling those products if they’re buying the business, don’t they?

And any buyer who wants to stay in the ball business has to remain product registered with the PBA and retain a pro staff. If you don’t do those, you might as well get out of the ball business.

Sadly, keeping the lanes and pinsetters business and getting out of bowling balls is something that might make sense to a buyer. I sincerely hope not because while I am a Storm Products lifer and greatly appreciate being with the company that clearly has been making the best balls for years, I have said many times that bowling needs many strong companies and it will not be good in the long run for the ball business to end up with one or two dominant companies.

PBA Commissioner Tom Clark might be in charge of the entity with as much to lose as any — venues, sponsorship/support and product registration – but he’s not totally negative on the deal(s).

“I think the initial shock that Brunswick, being such a trusted and important brand in bowling for over 100 years, would be seemingly getting out of the bowling business is going to make people who love bowling concerned and for good reason,” Clark said in a statement he sent me. “They have to be thinking, how can Brunswick not be bowling?

“But when you think about this development differently, the fact that someone proactively reached out to initiate this sale (AMF Bowlmor in this case) and the fact that AMF Bowlmor would be investing this much reported money in bowling means they see potential and have a strategy building towards that potential. That should be seen as a positive and the subsequent fact that B would no longer see the product side of its bowling business matching up with its strategic goals now that they are out of the retail side hopefully will end up being good for the people involved with the product side because any buyer will appreciate and value the professionals working on the product side now.”

Perhaps Shannon and Bowlmor will come to be more friendly to the serious side of bowling, as Shannon hinted at in his statement.

But even if they don’t, there is another potential positive out of this deal: Assuming the Brunswick centers focus on the recreational side of bowling, there will be more league and tournament opportunities for the independent proprietors in those markets.

I have nothing against chains, but generally have found the best bowling experiences to come at independent centers where the owners are on site running things. Whatever the business, it’s always better to be able to shake the hand and talk to the boss(es).

These typically are people who live and breathe and love bowling — they're the backbone of what is left of bowling.

Mike Flanagan, director of public relations for Storm Products and owner of InsideBowling.com, which has a partnership with 11thframe.com, said Bowlmor could benefit in another way from the Brunswick deal.

“Brunswick has a lot of good managers,” he said. “There are a lot of good bowling-minded people at Brunswick. Idea sharing could make the AMF centers better.”