Like anything else, companies evolve over time. But seldom has an evolution been quite as swift and dramatic as that of Briggs & Stratton Corp.
When the Milwaukee-based engine manufacturer announced in early June that its subsidiary, Briggs & Stratton Power Products LLC, had reached an agreement to acquire Simplicity Manufacturing Inc. (SMI), it was more than just the second largest acquisition in the company's 96-year history. Instead it was just the latest--and easily the most significant--move in the company's evolution toward becoming an integrated manufacturer of engines and engine-powered equipment for both commercial and consumer markets.
First the details. Briggs & Stratton will acquire Port Washington, Wis.-based Simplicity for approximately $227.5 million in cash, subject to adjustments. Simplicity manufactures more than 150 models of premium outdoor power equipment for both consumer and commercial applications, including Simplicity and Snapper consumer mowers, Snapper Pro and Ferris commercial mowers and Giant-Vac leaf and debris handling equipment (see related story). For the 10 months ending April 30, SMI had net sales of $285 million and anticipates net sales of approximately $350 million for the 12 months ending June 30, 2004.
The transaction is expected to be completed this mouth. While the Simplicity operations will become part of Briggs & Stratton's Power Products group, the Simplicity management reran, including CEO James A. Wier, will remain in placeThe acquisition is another step in Briggs & Stratton's strategy to present an evermore compelling value proposition to consumers of our products and superior returns to our shareholders," said Briggs & Stratton CEO, John S. Shiely. "We continue to look for different opportunities that allow us to grow our business and achieve our objective of providing operating returns that am excess of our cost to capital. We believe the acquisition of Simplicity Manufacturing aligns with this goal very nicely.
"Simplicity is a solid company with several compelling brands, a strong position in the retail dealer channel for outdoor power products and superior product development capabilities. We look forward to utilizing these assets to further our high-value integration ell forts with our traditional OEM customer base for mutual benefit."
While this is the second major equipment acquisition by Briggs & Stratton--the company purchased the small generator and pressure washer businesses of Generac in 2001--this one is clearly much more eye-catching. "If it makes tall grass short, it gets more attention based on the marketplace we serve," noted Bill Reitman, Briggs & Stratton's vice president of marketing. But Reitman added that it was a logical move in light of where Briggs & Stratton saw the business turning at the end of the last century.
"Back several years, as we looked to the future as solely an engine company, growth opportunities were more limited," Reitman said. "We saw the competitive landscape changing.
"You already had a number of partially integrated suppliers--the Hondas and Kawasakis of the world. You had the emergence of Chinese end product manufacturers, some of whom are integrated, some of whom are buying engines. As we looked to the future, we saw things changing."
Those changes would require what Reitman called "more integrative relationships" such as acquisitions, joint ventures and partnerships, with an eye toward getting the company closer to both its OEMs and end users of both consumer and commercial machines.
"For the last several years, we've explored with maW customers, how can we develop those kinds of integrative relationships," Reitman said. "The Generac acquisition came about in part because it went on the block at the same time one of our other significant customers in that market was going through bankruptcy filings. Those were our two largest consumers of engines and we had a vested interest in the future growth of the generator and pressure washer markets. Our competitors on the engine side were also fully integrated in those arenas, so it seemed to make sense to us to pursue the acquisition mode.
"This was another similar situation when Simplicity became available. Not knowing where it was going to go, we took a look at whether or not it made sense to be part of us and it did. So we pursued that route."
It also seemed a natural because Simplicity and all of its subsidiaries are significant users of Briggs & Stratton engines. But Reitman pointed out that Simplicity had not used Briggs engines exclusively, "nor do we have any desire for that to be the case.
