Thirty-eight-year-old hot-tub producer L.A. Spas has been sold.
MAAX Spas Industries Corp., a private-equity-owned producer in Chandler, Ariz., made the acquisition. While the firm would not disclose the purchase amount, it was characterized as being in the multimillions of dollars.
L.A. Spas will remain a distinct brand under the MAAX umbrella, joining California Cooperage, Elite Spas, MAAX Collection, PowerPool and Vita Spa, which was acquired by MAAX in 2009.
The sale will have very little impact from the consumer side, said Emil Nygard, vice president of MAAX Spas. Product selection will remain the same, and warranties will be honored, as will all dealer agreements and inventory contracts.
Those considerations made news of the sale an appealing event, instead of an uncertain one for dealers.
“I’m very excited about the potential,” said Stephan Drapeau, owner of Haven Spa Pool & Hearth in the Portland, Ore., area. “I’m looking forward to developing a relationship with MAAX and the added value they may bring to me as a dealer and the L.A. Spas brand.”
The sale, announced Dec. 4, was the result of an unusual property issue. L.A. Spas leased its Anaheim, Calif., manufacturing facility, which was sold in July.
“What looked like a fairly … benign change in the ownership of the building L.A. Spas [leased] turned into a pretty big event,” Nygard said.
Before long, the new owner told L.A. Spas it no longer wanted to lease the facility but preferred to sell it.
“Tenants had to either buy their buildings or move out,” said Brad de Koning, CEO of L.A. Spas. “The asking price of L.A. Spas’ space was approximately $12 million. While revenues grew 55 percent in the past three years, L.A. Spas re-invested significant capital in a major upgrade of the manufacturing process and in new products. The company’s free cash flow would not support the real estate transaction in the near term, and in a couple of years the company could outgrow the space altogether.”
L.A. Spas was not able to find a new manufacturing facility in the tight Southern California real estate market and began to explore a sale. “It was not a distressed asset,” Nygard said.
L.A. Spas’ production is being moved to MAAX Spas’ Chandler plant. To accommodate the additional volume, MAAX will add a second shift and increase capacity. “There will be a period of integration,” Nygard said. “We anticipate it taking somewhere from three to four weeks to get the main selling products up and integrated.”
All product integration is scheduled to be in place by the end of January, and dealers shouldn’t experience any supply interruption or inventory challenges.
“We knew there would be a short period of time where dealers could not get our products,” de Koning said. “While this was unavoidable, we structured our November early buy so our customers could stock up on inventory and get through what is typically a slower sales period for our industry.”
Positions will be offered to L.A. Spas’ production and production management staff, and some administration, and sales managers. There will be layoffs in some overlapping job functions, such as administrative and marketing positions.
“There are geographic issues: one is in LA and one is in Phoenix. We’re not sure how many folks will come over,” Nygard said. “We’re there to offer the jobs because that works out very well. ... It’s better to have folks who know how to do it when you’re going to expand. It makes it easier for everybody.”
MAAX Spas is owned by Brookfield Asset Management, a private equity firm that encourages growth through acquisition. “We were constantly looking for these opportunities,” Nygard said. “… A lot of us have the extra [manufacturing] capacity, especially since the recession, and because the fit was so good, we moved quickly with the deal.”
To help with the transition, de Koning will consult with MAAX through spring.