Winnebago Takeover Latest RV Consolidation

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October 19, 2010 by   Comments Off on Winnebago Takeover Latest RV Consolidation

Winnebago Industries Inc., the biggest U.S. maker of motorhomes, may make its first acquisition in more than 20 years, signaling the recreational vehicle market sees a sustained economic recovery, Bloomberg reported.

Winnebago may acquire SunnyBrook Manufacturing Inc., the privately held maker of towable recreational vehicles, by the end of the year, according to a statement Monday (Oct. 18). Winnebago, which didn’t disclose financial details, said it has signed a letter of intent and is still studying the potential deal.

A takeover by Forest City, Iowa-based Winnebago would mark an entry into the faster-growing towable RV market, Craig Kennison, an analyst at Robert W. Baird, wrote in a research note. The acquisition also reflects confidence among RV makers, which have foreshadowed economic declines and rebounds.

“There won’t be a double dip in the RV industry,” Mac Bryan, vice president of administration at the Recreation Vehicle Industry Association (RVIA), said Monday in a telephone interview. “This is a marketplace that is in recovery.”

The acquisition would be Winnebago’s first in more than 20 years, Sheila Davis, a spokeswoman, said in a telephone interview. Davis said the company, which announced in November 2009 that it was studying “potential diversification strategies,” may consider additional acquisitions.

Winnebago leads the motorhome industry with a 19% market share, according to Robert W. Baird’s Kennison, who is based in Milwaukee. SunnyBrook sold 1,700 towable RVs last year, making it the  13th largest manufacturer in that market, Kennison wrote in a research note.

‘Like the Concept’

“We like the concept,” he wrote. “Winnebago has the most recognizable brand in RVs, but has yet to leverage it in the faster-growing towable market. SunnyBrook would represent a small but strategic step in that direction.”

Kennison estimates Middlebury, Indiana-based SunnyBrook’s annual revenue at $30 million to $40 million.

Wholesale deliveries by U.S. RV manufacturers surged 71% to 177,300 units through the first eight months of 2010, according to the RVIA. Shipments in all of 2009 were 165,700, the lowest since 1991, according to RVIA data, as consumers deferred discretionary purchases during the economic slump.

Shipments may rise to 239,900 in 2010, a gain of 45% from 2009, according to Richard Curtin, an RV industry analyst and director of consumer surveys at the University of Michigan. Industry shipments may increase 8% to 259,600 in 2011, according to Curtin, who analyzes data for the RVIA, the industry’s Reston, Virginia-based trade group.

The RV industry includes more than 80 manufacturers, RVIA’s Bryan said.

Consolidation Time

“This is the time in the business cycle where consolidation tends to occur,” Bryan said. “While we’re still seeing some problems continuing related to consumer confidence and the availability of credit, we’re finding that primary demand is very strong. Consumers want to be in RVs and in the outdoors.”

Among the investors reaping gains from the industry is Warren Buffett’s Berkshire Hathaway Inc. Berkshire’s Forest River Inc. RV unit helped the holding company’s manufacturing, service and retailing businesses more than double earnings to $1.15 billion in the six months through June 30, according to a regulatory filing.

Winnebago and Jackson Center, Ohio-based Thor Industries Inc. are the largest, publicly traded RV makers.

Shares of Winnebago have lost 20% this year after more than doubling in 2009. Thor has declined 1.6% this year.

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