Winnebago Industries (WGO) to Acquire Towable RV Maker Grand Design

October 3, 2016 7:30 AM EDT

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Winnebago Industries, Inc. (NYSE: WGO) announced that it has entered into a definitive agreement to acquire Grand Design Recreational Vehicle Company ("Grand Design"), a manufacturer of towable recreation vehicles (RVs), for approximately $500 million in cash and newly issued Winnebago shares.

Founded in 2012 by Don Clark, Ron Fenech and Bill Fenech, a management team with over 80 years of combined leadership experience in the RV industry, Grand Design is a fast-growing manufacturer in the towables segment with rapidly expanding market share. The Company generated $428 million in revenue over the last twelve months ending August of 2016, representing a compound annual growth rate of over 80% since 2013, and a top tier EBITDA margin of 14%.(1) Grand Design is a portfolio company of global growth equity investor Summit Partners.

The acquisition is expected to be immediately accretive to Winnebago's growth profile, profit margins and earnings per share (EPS), excluding transaction costs and before giving effect to anticipated synergies. The transaction is expected to close by the end of Winnebago's first fiscal quarter of 2017, subject to regulatory approvals and other customary closing conditions.

"Grand Design has built a tremendous reputation and position in our industry by delivering quality products and high levels of customer satisfaction, and we are excited to welcome them to the Winnebago family," said Michael Happe, Winnebago's President and Chief Executive Officer. "Grand Design's differentiated and nimble approach to serving today's towable consumer, proven ability to deliver exciting new products and deep industry expertise complement our existing capabilities and Winnebago's iconic brand. The addition of Grand Design will accelerate our expansion in the towables business, creating a broader and more balanced portfolio well-positioned to capitalize on the opportunities across the RV market and to drive improved profitability and long-term value for stakeholders."

Mr. Happe continued, "I look forward to working closely with Don, along with the rest of the Grand Design team. With a shared focus on quality products, dealer relationships and customer service and satisfaction, together we will be even better positioned to serve dealers and customers well into the future."

Don Clark, Co-Founder and CEO of Grand Design, commented, "This is an exciting day for Grand Design and reflects the hard work and dedication of everyone involved in our rapid growth and success over the past several years -- the Grand Design team, our valued customers and our investors. We have incredible respect for Winnebago and are honored to join an iconic company that shares our dealer-centric, customer-focused culture. This shared foundation makes our two companies an ideal fit, and we look forward to maintaining our unique identity as an agile competitor as we leverage Winnebago's strong platform to broaden Grand Design's reach and deliver the best possible product and service to our dealers and our customers."

(1) Represents unaudited financial information

"We are proud to have partnered with Don and the entire Grand Design team and congratulate them on the exciting new partnership with Winnebago," said Jay Pauley, a Principal at Summit Partners.

Transaction Highlights

(Pro forma metrics represent unaudited financial information)

  • The combined company will have approximately $1.4 billion in pro forma revenue along with a broader and more balanced portfolio well-positioned to deliver growth, improved profitability and value.
  • The transaction is expected to be accretive to Winnebago's growth profile, profit margins and EPS, excluding transaction costs and before giving effect to anticipated synergies.
  • Annual run-rate cost synergies are anticipated to be $7 million, phased in over three years, to be achieved through identified opportunities in purchasing and the elimination of redundant processes with additional upside potential from sharing of manufacturing best practices.
  • The $500 million purchase price includes tax assets valued at over $75 million. After adjusting for the value of the tax assets, the purchase price implies a multiple of 7.1x Grand Design's last twelve months EBITDA of $60 million.
  • Winnebago expects to fund the transaction through a combination of $395 million in cash and $105 million in newly issued Winnebago shares. J.P. Morgan has agreed to provide committed financing for the transaction. Upon closing, Winnebago expects to have a debt to EBITDA ratio of approximately 2.5x, inclusive of anticipated annual run rate synergies.
  • The combined company is expected to generate significant cash flow that will facilitate rapid debt reduction. Winnebago expects to reduce its debt to EBITDA ratio to below 1.5x by the end of Fiscal 2018.
  • Immediately following the transaction, Grand Design shareholders will own approximately 14.5% of Winnebago shares outstanding.
  • Don Clark will continue to lead the Grand Design towables business post-closing as its President; he will also serve as a Vice President for Winnebago and be a member of the Executive Leadership Team.
  • Grand Design will operate as a distinct business unit within Winnebago with headquarters remaining in Middlebury, Indiana, and its portfolio of brands will remain in place.

Preliminary Fourth-Quarter Fiscal 2016 Results

In connection with today's transaction announcement, Winnebago also announced preliminary results for the fourth quarter of Fiscal 2016.

Revenues for the fourth quarter of Fiscal 2016 are expected to be approximately $263.3 million, an increase of 4.9%, compared to $251.0 million for the Fiscal 2015 period. Diluted EPS for the quarter is expected to be approximately $0.49, an increase of 14% compared to $0.43 in the prior year quarter. Included in the Company's EPS results are $0.01 of transaction related expenses related to its pending acquisition of Grand Design.

As previously announced, Winnebago will release its full financial results for the fourth quarter of Fiscal 2016 on October 13, 2016.

The preliminary quarterly results provided today are unaudited and subject to change as fiscal year end information is finalized.

Conference Call

Winnebago will conduct a conference call to discuss the transaction at 7:30 a.m. Central Time today. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of the Company's website at The event will be archived and available for replay for the next 90 days.

J.P. Morgan acted as financial advisor to Winnebago and Lindquist & Vennum LLP acted as legal counsel. Baird acted as financial advisor to Grand Design and Weil Gotshal & Manges LLP acted as legal counsel.

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