Analyst: Winnebago Worth at Least $19/Share
Editor’s Note: The following editorial appeared in the Waterloo Cedar Falls Courier.
Could Winnebago Industries Inc. expand its business model under new ownership?
That question has been fluttering around the business world over the last week or so, after the Forest City-based motorhome manufacturer revealed that it had received a takeover offer of $322 million, or $11 per share, from Greenwich, Conn.-based private-equity firm North Street Capital LP.
Winnebago isn’t saying much about the proposal, other than to confirm it has received of a letter from North Street Capital, which proposes to acquire all outstanding common shares of Winnebago for cash.
Winnebago, whose president and CEO is Waterloo native Randy Potts, reports that its management and board of directors have reviewed all the information provided by North Street and decided it’s not a “credible” proposal.
The company said it would review any additional information North Street provides and would respond accordingly.
More information will be forthcoming, according to North Street.
“We are interested in the solid manufacturing infrastructure of the company,” North Street said in an e-mailed response to an inquiry on the matter.
North Street plans to add final assembly of cars and trucks from “the Greater Asian Region” to Winnebago’s manufacturing portfolio.
That wouldn’t necessarily mean more workers in Forest City, but it certainly wouldn’t mean fewer, according to North Street.
“Judging by current WGO (Winnebago’s stock-market symbol) employment count and our business integration models, employee numbers would stay about the same with a possible recall of about 20 percent to 40 percent of the current WGO laid-off workers (within) 12-24 months,” North Street said.
In a subsequent e-mail message, Alex Mascioli, North Street managing director, said his firm would keep Winnebago’s Charles City properties, as well.
The investment firm said it would not alter Winnebago’s business model for building motorhomes. But the e-mail did say it was “too early to comment” on what would happen with Winnebago’s top management and current employee base.
For the moment, don’t count on any buyout, said David Whiston, an analyst who tracks Winnebago for Chicago-based equity research firm Morningstar Inc.
Whiston said North Street was “low-balling” Winnebago, considering the latter had a debt-free balance sheet and $81 million in cash that makes the company worth at least $19 a share.
“Obviously, when I see this $11, it’s way too low,” Whiston said. “Adjusting for the retiree health care, they’re effectively offering just over $9, which would be a steal.”
Winnegabo shares were trading at about $9 Thursday. The stock, which had been as low as $6.02 last November, reached its year-on-year peak at $9.75 May 18 — the day the company had acknowledged receipt of the offer — from a closing price of $8.52 the day before.
Winnebago has been trying to slug its way through rough economic times, with some success. The motorhome market has struggled since the recession and high fuel prices grabbed consumers by the collective neck. Last year, Winnebago’s sales of $496.4 million, although they were 43 percent below the most recent peak in 2007. In 2010, the company acquired SunnyBrook RV, re-entering the towable manufacturing market for the first time since 1983.
North Street could accelerate Winnebago’s manufacturing capacity, “and probably even bring jobs to the area if they brought Chinese ‘kit’ cars,” Whiston said.
He added ramping up such activity would be slow, but “I don’t think people need to worry about job losses.”
For now, all of this is speculation. North Street’s current offer likely is a nonstarter.
Nevertheless, it is intriguing to ponder how a bit of diversification at Winnebago might juice up the manufacturing prospects in northern Iowa.