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Purchase Gives Winnebago Towable Foothold

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December 30, 2010 by   Leave a Comment

Wednesday’s announcement, that Winnebago Industries Inc., had completed the purchase of SunnyBrook Manufacturing Inc., puts the Forest City, Iowa-based motorized manufacturer in good stead as the new year approaches.

The $5.7 million cash purchase accomplishes several key goals, according to Craig R. Kennison of Robert W. Baird & Co.

“The deal enables Winnebago to: 1) enter the faster-growing towable market; 2) establish a manufacturing footprint in the Elkhart, Ind., area, where most towables are made; 3) leverage the Winnebago brand in a new category; and 4) identify modest cost and distribution synergies. Winnebago has started small, which seems appropriate given its limited experience integrating acquisitions,” he said.

“We like the deal as it enables Winnebago to leverage its well-recognized brand in the faster-growing towable RV segment,” he added.

The sale is Winnebago’s first acquisition in more than 20 years, and analysts have said it indicates that the recreational vehicle market sees a sustained economic recovery, the Des Moines Register reported.

Winnebago said it would continue to manufacture the Indiana company’s line of towable trailers under the SunnyBrook name while also expanding the SunnyBrook product line to include Winnebago-brand trailer and fifth-wheel products.

Winnebago first announced in October that it was considering purchasing Middlebury, Ind.-based SunnyBrook.

At that time, analyst Kennison said the addition of towable trailers, a fast-growing piece of the recreational vehicle market, would be a good move for Winnebago and Bloomberg News reported the acquisition as a plus for the economy.

The actual price was well below Kennison’s October estimate that Winnebago would pay $15 million to $20 million for SunnyBrook based on his estimate that SunnyBrook’s annual revenue was between $30 million and $40 million.

Kennison now estimates the financial impact on Winnebago to be modest. He said the purchase price was “far less than we had assumed” and estimated the company’s annual revenues at $20 million.

The company announced the completion of the sale after the market had closed Wednesday with Winnebago shares losing 38 cents to close at $15.39. At today’s opening, shares traded higher briefly before dropping to about 13 cents lower.

Meanwhile, initial reaction from the town of more than 3,000 in northeast Elkhart County is also positive.

“From my perspective, it’s good to know that the business will stay here, good to know the emploeyes will have a place to work,” Mark Salee, town manager, told RVBUSINESS.com. “With the name Winnebago and the resources behind them, they could expand. That would be great.”

Winnebago will have its work cut out for it as it has purchased a brand going in the wrong direction, according to market research. SunnyBrook’s retail sales through October totaled 1,166 units, according to Statistical Surveys Inc., a 28% decline from the 1,623 it sold in the first 10 months of 2009. SunnyBrook’s market share declined 33% year-over-year, from 1.2% to 0.8%.

Winnebago will likely expand on its initial announcement with further details in a Securities and Exchange Commisison filing later today or Friday, Sheila Davis, the company’s PR and investor relations manager, told RVBUSINESS.com.

The synergies will help cut towable production costs as Winnebago already makes many of the components it uses for its motorized units and will likely provide some of them for the SunnyBrook operation in Middlebury.

Winnebago’s holiday shutdown in Iowa continues through Monday. Production will resume on Tuesday. SunnyBrook also is shut down for the holidays. SunnyBrook was founded in 1992 and has approximately 100 employees working in its 200,000-square-foot manufacturing facility in Middlebury. One plant will reopen for production on Jan. 3, the other on Jan. 10, Davis said.

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