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Private Equity Firm Buys MAAX Corp.

By Jim Lakely

Just weeks after MAAX Corp. scuttled a deal to sell off its spa division, the company has been sold to a private equity firm.

Montreal-based MAAX manufactures bathroom fixtures, tubs and showers. The firm also produces spas under the Coleman, California Cooperage, Elite and Nahanni lines.

In exchange for assuming all of MAAX’s liabilities, Brookfield Bridge Lending Fund Inc. of Toronto will gain control of the company.

Brookfield is the biggest creditor of beleaguered MAAX, holding $270 million of its debt. Other investors, who have pumped $300 million into the company since it went private in 2004, get no payback or control in MAAX.

Brookfield plans to split the bathroom and spa divisions into two separate, wholly owned subsidiaries.

The sale will commence through a court-supervised process, roughly the Canadian version of a Chapter 11 bankruptcy procedure in the United States. MAAX Corp.’s American holdings, including the spa division, were not included in the filing.

The housing slump has hit MAAX hard and was a factor in the $540 million debt that the firm accumulated. Cutbacks, including consolidation and the closing of four plants, couldn’t stop the company’s financial bleeding.

“We just didn’t have the balance sheet to allow us to go through a down cycle in our industry,” said Denis Aubin, MAAX’s executive vice president/CFO, in a June conference call with reporters.

MAAX’s revenue has dropped 25 percent since 2004, the year a group headed by Boston-based private equity firm J.W. Childs Associates LP acquired the company in a leveraged buyout. MAAX announced in May that year-to-year net sales were down 11.8 percent, representing operating losses of $104.8 million from Feb. 28, 2007, to Feb. 29, 2008.

The company’s spa division experienced a dramatic drop in net sales in recent years, from $54 million in 2006 to a projected $35 million in 2008, according to company documents.

But officials at Brookfield said they are bullish on the future of hot tubs, and the firm plans to be a part of the industry in the long-term.

The Brookfield deal, announced June 12, came as a surprise to James Keirstead. He owns Blue Falls Manufacturing Ltd., the Thorsby, Alberta-based manufacturer of Arctic Spas. Officials at the firm started working in February to arrange the purchase of MAAX’s spa division, a deal that MAAX and Keirstead announced May 28 in a joint press release.

But MAAX pulled out of the purchase June 5, and the Brookfield buyout was announced a week later.

“As far as I knew, we had a deal,” Keirstead said. “It was a very frustrating process for us to have gone all that way and not have it come to fruition.”

The acquisition fell through because Arctic could not come up with an acceptable financing plan, according to Terry Rake, vice president/general manager of MAAX Spas Arizona Inc., based in Chandler.

“I think the world of those guys at Arctic,” Rake said. “We all thought we were very close to a deal and financing was not a concern. As bad luck would have it, it was a concern. We’re all disappointed.”

Nevertheless, the final outcome is positive for the industry, Rake added. “We see it as a terrific opportunity to grow and have access to capital that we didn’t have in the past.”