Winnebago To Acquire Private Towables Maker Grand Design
Zacks Investment Research | Oct 09, 2016 09:05PM ET
Winnebago Industries, Inc. (NYSE:WGO) has announced its decision to acquire privately held towable recreation vehicles (RVs) producer, Grand Design Recreational Vehicle Company, for roughly $500 million. The transaction is expected to be funded by roughly $395 million in cash and $105 million in newly issued shares of Winnebago, resulting in Grand Design’s shareholders owning 14.5% of Winnebago’s shares outstanding post the merger. The deal is expected to close by the end of Winnebago’s first-quarter fiscal 2017, subject to regulatory approvals and customary closing conditions.
Per the deal, Winnebago will own Grand Design’s tax assets valued at $75 million. Excluding the cost of assets, Winnebago’s purchase price implies paying 7.1 times Grand Design’s prior 12 months EBITDA of $60 million. However, the company generated revenues of $428 million in the 12 months ended Aug 2016. The figure represents over 80% compound annual growth rate since 2013 and an EBITDA margin of 14%. Global growth equity investors, Summit Partners, have also invested in Grand Design earlier.
The combined company will generate roughly $1.4 billion in pro forma revenue, in addition to enhancing Winnebago’s growth, profit margins and earnings per share. Annual cost synergies post completion of the deal is projected at roughly $7 million, phased over three years. Synergies are expected to be achieved through better purchasing opportunities and removal of unnecessary processes, along with an upside potential from sharing manufacturing processes. The acquisition is also likely to help Winnebago lower its debt by significantly increasing its cash flow.
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