Irv the Boat Maker

“It Didn’t Take a Rocket Scientist”

Born in 1941 to parents who had arrived in Minneapolis as immigrants from Russia—his father by way of Ellis Island in 1911—Jacobs says his tutelage as a peddler began at age five. “I’d go out with my dad in his truck,” he recalls, making the rounds of grain elevators, where his father picked up old grain sacks, cleaned them, and sold them back to the elevator operators. “When I was 12, Dad gave me a checkbook, and I went out with a driver to pick up old gunny sacks at elevators around Minnesota. At 15, I drove myself.”

His parents were “after me for years to go to college.” So after graduating from high school, he enrolled at the University of Minnesota—and stayed for three days. The deal with his father (“Try it; you might like it”) was that if college disagreed with him, he could return to the family business. “So three days later, I went back to work. My father said, ‘What are you doing here?’ I said, ‘I kept my part of the bargain, now you keep yours.’”

By the late 1960s, the grain-sack operation had evolved into a liquidation business that bought and sold the inventory from insurance-salvage yards—merchandise from businesses struck by bankruptcies, hurricanes, fires, and so on. That’s essentially what Jacobs Trading Company still does today, he says: “We make the goods disappear,” whether to foreign countries, fourth-level retail stores, or flea markets.

“They’ve called me a risk taker,” Jacobs says. “But I’ve always been a junk buyer more than a risk taker.” In 1993, for instance, he bought the block of downtown Minneapolis real estate on Nicollet Mall where the failed Conservatory retail complex stood. “They said a risk taker bought it.” Opened in 1987, the Conservatory cost $80 million to build. Jacobs picked up the property for $1.5 million and sold it two years later for $13.5 million. (U.S. Bancorp’s headquarters are there now.)

In another locally famous deal, also in 1993, he bought the failed Canterbury Downs racetrack in Shakopee. “They said a risk taker bought it. Canterbury cost almost $100 million to build, and it wasn’t 10 years old when I paid $7 million for it,” before selling the track three months later at a tidy profit. “The people who built those properties were the risk takers. I was the undertaker.”

Leveraged buyouts are remembered as a phenomenon of the 1980s, but for Jacobs the ’80s began in 1975, when he bought Grain Belt Brewing in Minneapolis. “Basically, they sold it to me for about the same amount of money that they had in cash in the bank,” he says. “And they had no debt. It didn’t take a rocket scientist.” But the transaction drew a lot of local attention, because “it was a leveraged deal, and in those days people didn’t know that leverage could work like that.”

Most of the money, more than $4 million, was provided by Carl Pohlad of Marquette Bank, now owner of the Minnesota Twins. Pohlad would play a role in many of Jacobs’s acquisitions, completed and attempted. The two remain close friends, and Pohlad is still an investor in Jacobs’s ventures, including Genmar.

Pohlad first met Jacobs in connection with the Grain Belt deal and remembers being impressed from the beginning. “For a young man, he exuded unusual self-assurance and a confidence that was contagious,” Pohlad writes in an e-mail. Jacobs’ analysis of the “Grain Belt opportunity” was “comprehensive and right on target,” he adds. “He was persuasive in his belief that the true value of the Grain Belt assets, especially the real estate, greatly exceeded the purchase price he personally negotiated. The proposed transaction was readily bankable . . . . I would say our chemistry was right from the start.”

Jacobs says he intended to operate the brewery, not to dispose of it. “But all the big nationals were coming in at the time. We had the highest cost per barrel of any brewery in America, I think.” When he tried to cut costs, he ran into a union dispute, which he lost in arbitration. So, in 1976, less than a year after buying Grain Belt, he sold the brand to Wisconsin’s G. Heileman Brewing Company. At the age of 35, he says, “I walked away with $5 million and a bunch of real estate [which he sold in the early ’80s to the City of Minneapolis]—more money than I thought existed in the world.”

His second leveraged acquisition, on the heels of the first, saddled him with the Irv the Liquidator label. In 1976, the New York–based W. T. Grant variety store chain went bankrupt, and Jacobs bought its receivables, again with Pohlad as a backer. “I was known locally because of the brewery, but the world outside Minneapolis had never heard of me,” Jacobs says. “The Wall Street Journal said, ‘Who’s this guy who bought W. T. Grant’s receivables for $40 million?’ I’d had the brewery for 10 months, and then I was out of business. Because of that and my past as a junk peddler, they said ‘Irv the Liquidator.’ So that’s where that came from. The Wall Street Journal did it.

“It was a catchy line,” so it stuck, he adds. “It never bothered me as much as people think it does. It is what it is.”

Keeping a Boat Business Afloat

In 1977, Jacobs paid $575,000 for bankrupt Larson Industries, a Little Falls boat manufacturer. “The first year, we did about $5 million in business,” and lost $5 million in the first two and a half years, he says. “That plant does about $200 million now.”

In 1978, Jacobs bought out the largest shareholder in Arctic Enterprises, which had holdings that included Arctic Cat snowmobiles and Lund fishing boats. When Arctic Enterprises filed for Chapter 11 bankruptcy protection the next year, Jacobs says, “I took it over. We sold off the snowmobile assets and merged our boat business with theirs. When we liquidated, we created Minstar, Inc.” The public company’s only holdings were Larson and Lund, “two little boat companies.” Arctic Cat’s stockholders got equal shares in Minstar, at 50 cents a share, Jacobs says. When he took Minstar private 10 years later, “we paid about 125 times that—the equivalent of $64 a share for original shares.”

Minstar became the vehicle for Jacobs’s leveraged buyouts and takeover attempts of the 1980s. Under the Minstar umbrella, “we bought and sold maybe 30 businesses,” he says. A 1981 acquisition that doubled the size of the boat business was Aegis, a Florida-based maker of runabouts, fishing boats, and cruisers. Minstar gave its boat division a new name: Genmar, for General Marine.

Another successful acquisition was the 1985 hostile takeover of AMF Corporation, the New York–based recreational equipment maker. According to Forbes, Jacobs paid $560 million for AMF and sold 60 percent of its assets for $545 million. But he kept its boat business, merging it into Genmar.