Camping World’s McMahon’s RV Buyout Stalls?
Camping World Inc. President and CEO Marcus Lemonis says the deal that his 90-store Chicago-based RV rolling stock chain has been trying to put together to acquire troubled Southern California dealer McMahon’s RV — once one of the state’s leading RV retailers – is being jeopardized because of escalating costs that have surfaced since Camping World agreed in principle to buy the store.
“We signed a letter of intent about 10 days ago on a McMahon’s transaction and, unfortunately, we’ve put about $5 million dollars in cash on the table to help satisfy the liabilities that exist there – everything you can think of, including out of trust, trade payoffs, sales tax, employee wages, customer deposits, customer warranties, and we thought that was going to be sufficient,” Lemonis told RVBUSINESS.com.
“But two things are happening. One, we’ve been asked to put more money on the table and, No. 2, the hole that we thought existed is significantly larger than we originally thought. I mean, millions larger,” said Lemonis with regard to the Westminster, Calif.-based retailer. “And, you know, my primary goal is that the employees and customers get taken care of. And we’re trying to figure out a way to do it and it’s not looking good because the hole – the amount of money it will take to really clean everything up – is so big. It’s north of $8.5 million.
“That just doesn’t work for us,” added Lemonis, who continues to work with the landlords and manufacturers to close the transaction. “You know, you’re buying into something that’s already in really bad shape.”
As previously reported, GE Commercial Distribution Finance (GECDF) filed suit in early April against McMahon’s seeking a restraining order, claiming the retailer has an “out-of-trust” balance of just over $3.56 million. The alleged “default” stems from the closure of its outlet in Mesa, Ariz., and the subsequent distribution and sale of inventory at other McMahon’s RV sites.
Lemonis said he figured the $5 million would cover the employees and customers in the planned acquisition, which would have involved leasing McMahon’s real estate as part of a “strategic” move for Camping World.
But he says Camping World, which is working on “six other acquisitions in other markets as well as building seven stores right now,” was unaware of the hidden costs it is now confronting with regard to the SoCal dealership — one of the larger RV rolling stock stores to have survived the recession.
Now, he added, it looks like $8.5 million would have to be spent before Camping World would consider putting “a lick of inventory on the ground.”
Making matters worse, he noted, is the fact that the situation is snowballing.
“As I sit here today, my primary concern is employees who have not been paid and the customers, a lot of whom are calling just all hosed up,” said Lemonis. “I mean, they’ve given deposit money. Their trades aren’t paid off. We have employees going to our stores looking for paychecks and, you know, we don’t own the business. We just signed a letter of intent to try to fill this hole, but the hole is so big I don’t know if it’s possible.”
A court date in the lawsuit, filed in the Central California U.S. District Court, is set for May 7 to determine “why the court should not grant GECDF a preliminary injunction” prohibiting McMahon’s from “further disposing of GECDF’s collateral.”