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Owl Creek managing partner Jeffrey Altman said in his Jan. 30 letter that Brunswick Corp.'s marine segment has a greater standalone value than the current valuation for the rest of Brunswick, "implying the market assigns negative value to the fitness segment."

Life Fitness Spin-Off from Brunswick Urged by Active Investor Owl Creek

In a Jan. 30 letter, Owl Creek managing partner Jeffrey Altman suggested Brunswick's board of directors take "immediate" action to separate its Life Fitness Division. Owl Creek currently owns 2.8 percent of Brunswick's outstanding common equity.

Owl Creek Asset Management, New York, has secured an activist stake in Brunswick, Corp. Lake Forest, Illinois, and is lobbying the company to "spin-off" its Life Fitness Division.

Owl Creek currently owns owns 2.5 million shares, or 2.8 percent, of Brunswick's outstanding common equity, according to a media release.

In a Jan. 30 letter to Brunswick's board of directors, Owl Creek managing partner Jeffrey Altman said "all Brunswick stakeholders would benefit significantly from a spin-off of the fitness equipment business."

"We believe that a separately traded fitness business could command a public market premium vs. other businesses with similar market positions and growth characteristics, as it could provide investors with an excellent vehicle to invest in global health and wellness growth trends," he said in the letter. "There are few ways to do this in the public markets currently."

Altman said Brunswick's marine segment has a greater standalone value than the current valuation for the rest of Brunswick, "implying the market assigns negative value to the fitness segment."

Brunswick's Life Fitness Division includes its Life Fitness, Cybex International and Hammer Strength brands. This segment comprises a smaller portion of the company, whose marine segment contributes the majority of Brunswick’s $4.7 billion in annual revenue. Brunswick also manufacturers billiards tables.

"Brunswick is always open to constructive input from our shareholders about how we can further strengthen the company, and we appreciate the ongoing dialogue we have had with Owl Creek over the last several weeks," Brunswick CEO Mark Schwabero said in a Jan. 30 response to Altman's letter. "Our board has a proven track record of driving strong operating performance and taking decisive actions with respect to our portfolio as part of our commitment to delivering shareholder value."

Altman criticized Brunswick's integration of Cybex into its fitness portfolio during 2016 and 2017, stating the integration "could have benefited from greater management and board focus." The letter also encourages Brunswick to "de-stagger [its] board," ensuring that directors will be elected annually.

The letter states: "[T]here are significant growth opportunities as greater health awareness drives increased exercise demand, and technology opens up new ways to engage workout participants as well as new revenue opportunities. In addition, developing markets, and China in particular, have massive growth potential over the next 10 years, as gym membership penetration is growing rapidly but still a small fraction of that in developed markets. Without improved execution, Brunswick runs the risk of missing out on these tremendous opportunities. An independent publicly traded fitness business would have improved operations, as the management team would be more focused, and more directly aligned with business performance through share compensation.

"Lastly, a separation would likely create a greater culture of accountability and improve employee retention and recruitment," Altman said of Owl Creek's proposal.

Brunswick's share rose 7.7 percent on Jan. 30 and closed at $63.24.

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