The pursuit of sales leadership in the RV industry has often been referred to in recent years as a “two-horse race” between Jackson Center, Ohio-based Thor Industries Inc. and Elkhart, Ind.-based Forest River Inc., both of which specialize in the manufacture of towable recreational vehicles.
And the stakes in that ongoing race were raised today (Sept. 17) with the surprise announcement that Thor Industries Inc. has purchased competitor Heartland Recreational Vehicles LLC for $100 million in cash and 4.3 million shares of Thor stock. The purchase was valued at approximately $209 million, based on Thor’s closing price on Thursday.
It was news in which Wall Street took great interest, as Thor stock rose sharply at today’s opening and was $2.20 higher at $27.65 in early-afternoon trading. When this story was posted, Thor’s stock had climbed to over a one-month high and had also recrossed its 50-day moving average, the RTT Service noted. Thor stock rose 9.9% by day’s end, closing at $27.95 per share, the fifth highest percentage gainer of the day, on volume of 1.32 million shares.
“Heartland’s strong growth has been driven by a culture of innovation, competitive products, and attention to the retail customer,” said Peter B. Orthwein, chairman, CEO and president of Thor, which posted $2.3 billion in revenues ($1.85 billion in RVs) for the fiscal year, ended July 31. “Thor’s new relationship with Heartland will bring many operational synergies to all Thor companies including purchasing and lean production processes, among others.”
Thor’s purchase of Heartland, the No. 3 builder of fifth-wheels and No. 6 assembler of travel trailers, creates some daylight between Thor and Forest River, which had been closing rapidly on Thor’s once-thought insurmountable lead in the RV market – at least for now.
Heartland produced in excess of $400 million in sales over the last 12 months. Its year-to-date unit production through June 30 was 5,003 units, according to Statistical Surveys Inc. (SSI).
When the Heartland numbers are factored in with Thor’s, the combined company sold 32,123 towable and motorized units through the first half of the year for a 35.1% market share compared to Forest River’s 26,144 units, or 28.6%.
Without the Heartland acquisition, Thor’s year-to-date lead over Forest River was a marginal 876 units.
Looking strictly at towables, the gap widens further. With Heartland, Thor’s towable sales total 30,343 units vs. Forest River’s 20,233. The Forest River numbers in all circumstances include its Coachmen and Prime Time divisions.
“We’ve been No. 1, and this kind of extends our lead,” Ron Fenech, Thor’s RV group president, told RVBUSINESS.com today following his publicly held company’s blockbuster announcement. “But, really, for me, I like being No. 1. But I just want to be great. The numbers will take care of themselves.”
“Over the past five years, Heartland has been a tough competitor,” Fenech continued. “They’re very innovative in their designs, and I’m excited to have them as part of our team.”
RVBUSINESS.com pointed out that no company has absorbed as much market share as Thor now does, certainly since the heyday in the 1980s and ‘90s of California-based Fleetwood Enterprises Inc. But Fenech, for his part, drew a distinction between Thor and Fleetwood of old.
“Fleetwood over the years had very large market share when they were in their prime,” he said. “How Thor is different from Fleetwood is that Fleetwood was a very centralized organization and I think over time they lost touch with the customer because they became so centralized in their thinking that they couldn’t respond to what was going on in the marketplace.
“With Thor, our market share is broken up into many different companies, each doing their own designs, each having their own culture, each finding their way in the marketplace. Our goal is to be very responsive while still benefiting from some of the purchasing advantages you have by buying the quantities of material that we do.”
Thor, according to Fenech, plans to continue that same kind of a management approach. “Very much so,” he said. “Heartland’s going to remain independent, just like our other companies, and the entire management team is being held in play.”
By the same token, Fenech noted, Heartland’s culture will meld well with Thor’s, despite several years of intense competition.
“Well, there’s always a transition that takes place, and what made Heartland great is what makes all good companies great, and that’s that feeling of ownership, that feeling that ‘we control our own destiny,’ and that very much fits with the culture within Thor,” he said. “You know, Keystone tripled in size after its acquisition by Thor, and we were allowed to run our own game, and that’s very much a philosophy that we’ve had within Thor and that Heartland will operate under.”
Heartland has been the fastest growing RV manufacturer in recent years, percentagewise. Its brands include Bighorn, Sundance, Cyclone, North Country, and North Trail, sold through a nationwide network of dealers.
Thor Industries Inc. has bought a controlling interest in Elkhart, Ind.-based Heartland Recreational Vehicles LLC. The purchase price is $200 million.
The acquisition, Thor’s first major purchase since 2005 and just two weeks after its 30th anniversary, has been rumored for several days.
Catterton Partners, a leading consumer-focused private equity firm in North America, today (Sept. 17) announced that it sold its controlling stake in Heartland for cash and stock.
Heartland recorded sales the last 12 months in excess of $400 million.
Under Thor’s ownership, Heartland RV will continue to operate under the Heartland name and will maintain its current brand portfolio. Heartland will remain headquartered in Elkhart and will continue to be led by the company’s current management team under CEO Brian Brady.
“We are proud of the dramatic growth that Heartland has experienced, and we believe that the transaction with Thor will further accelerate Heartland’s growth,” said Scott Dahnke, managing partner of Catterton Partners. “This transaction pairs Heartland with the most successful RV company in the world; we are confident that it will be a winning combination for Heartland dealers and consumers. Industry fundamentals remain strong, and with Thor’s breadth, scale and financial resources, Heartland can continue to offer its dealers and consumers the highest quality products for great value, while continuing its record of product innovation and outstanding service. We are excited to be Thor shareholders and look forward to the substantial upside inherent in the combined company.”
“We are very excited about this transaction as it clearly benefits our dealers, our employees, our customers, and the entire Heartland family. Under Thor’s ownership, we will have access to increased financial and operational resources which will enable us to continue our strong momentum in the marketplace,” said Brady. “I want to thank our employees for their hard work and dedication to Heartland; their efforts have been a critical part of our success. We are pleased to bring Heartland’s creative energy and relentless commitment to excellence to the Thor family. The entire Heartland organization looks forward with great anticipation to continuing to offer our dealers and consumers the same best-in-class products and innovations that they have come to expect from Heartland.”
Since partnering with the Heartland founders in early 2007, Catterton has worked with the Heartland management team to enable the company to become the fourth largest manufacturer of towable RVs in the U.S., up from the 12th position at the time of its investment. Over this period, Heartland has quadrupled its sales, earnings and market share by expanding its geographic reach, introducing innovative new product lines, and enhancing the overall customer experience, all while maintaining strong relationships with its loyal dealers. Recently, with Catterton’s support, Heartland also enhanced its brand portfolio through its acquisition of Fleetwood Enterprises’ towable brand portfolio.
Heartland is a leading manufacturer of towable recreational vehicles in the U.S. The company markets over 15 brands of fifth-wheel and travel trailer RVs and has captured the No. 3 market share in the fifth-wheel category. Heartland’s towable RVs are sold through an independent network of dealers throughout the United States and Canada. The company has over 1,000 employees.
Heartland was founded in January 2005 by Brian Brady and four others, Tim Hoffman, Doug Lantz, Jon Rhymer and Scott Tuttle. Lantz and Tuttle have since sold their interest in the company. Jack Culbertson subsequently became a minority owner.
In 2007, Catterton Partners, a private equity firm, made a significant investment in Heartland, which allowed the company to go forward on a major expansion and new product introductions beyond its fifth-wheel product lines.
In sharp contrast to an industrywide downturn in 2009 towable sales, Heartland showed pronounced year-over-year gains punctuated by a 43.3% increase in overall market share growth, according to a news release.
According to Statistical Surveys Inc., the Elkhart, Ind.-based builder posted a 6.1% increase in unit sales, while moving to the No. 4 spot among all towable builders for the year. Conversely, towable sales dropped 25.9% industrywide with the majority of builders incurring a decline in unit sales from 2008.
- For the full year, Heartland ranked as the No. 3 fifth-wheel manufacturer with 11.3% of the overall market share – buoyed by a 19.2% jump from 2008 – while its luxury BigHorn line ranked No. 3 among all brands with 9.8% market share growth. During December, the company increased fifth-wheel market share from 12.3% to 13.2%. Industrywide, year-over-year sales in the sector dropped 29.9% in 2009.
- After entering the travel trailer sector in May 2008 with its lightweight North Trail line, Heartland made significant strides last year to move into the upper tier of manufacturers with a 152% gain in market share and a No. 10 ranking. For December, the builder upped travel trailer unit sales by nearly 46% and improved market share from 2.5% to 3.4%. Industrywide, travel trailer sales fell 23.5% for the 12 months.
Heartland announced in February that it purchased the remaining trademarks of the towable brands of Fleetwood Enterprises and intended to build the product in Elkhart County.
That plan has been delayed in recent weeks as the deal with Thor was being struck.
Thor Industries, Inc., was founded on Aug. 29, 1980, when Wade F. B. Thompson and Peter B. Orthwein acquired Airstream Inc., Jackson Center, Ohio, the most recognized name in the industry. Despite its venerable image, Airstream had not fared well during the economic downturn of the late 1970s. By focusing on improving quality while reducing costs, Airstream had returned to profitability in its very first year under the new Thor management.
By 1982 Thor was strong enough to purchase the Canadian company General Coach, which manufactures travel trailers and fifth-wheels in Hensall, Ontario, and Okanagan, British Columbia. (Thor subsequently sold this company earlier this year.)
In 1984 Thor became a public company and in 1986 was listed on the New York Stock Exchange. That same year, Forbes Magazine ranked Thor No. 6 out of the “200 best small companies in America.”
In 1988, Thor entered the small and mid-size bus industry with the acquisition of ElDorado Bus. In 1991, National Coach was purchased and the two companies operated under the ElDorado National trademark, with plants in California and Kansas.
Also in 1991 Thor acquired Dutchmen Manufacturing Inc., now one of the leading brands of travel trailers and fifth-wheels. Four Winds International Corp., manufacturer of Class A and Class C motorhomes, was acquired in 1992. Komfort Corp., builder of trailers and fifth-wheels, became part of the growing Thor family in 1995. 1996 saw the start-up of Thor California, which became one of the most successful RV start-ups.
In 1998, Thor solidified its leadership in the bus industry with the acquisition of Champion Bus.
When Thor joined forces with Keystone RV in 2001, the company achieved an unprecedented dominance within the RV industry. With the acquisition in 2003 of Damon Corp., manufacturer of Class A motorhomes, and Breckenridge, builder of park trailers, and the addition of Crossroads RV in 2004, this dominance was complete.
Finally, in 2005, Thor acquired Goshen Coach to round out its holdings in the small and mid-sized bus industry.
Over the years Thor has received many honors for its growth and management success. In January 2000, Forbes included Thor in its Platinum 400 list, and in April, 2004, Thor was added to Standard & Poor’s Mid-Cap 400. Also in 2004, Forbes declared Thor to be one of the “Best Managed Companies in America.”
In 2005, Fortune called Thor one of “America’s Most Admired Companies,” and Industry Week ranked Thor as one of the 50 best U. S. manufacturers. Thor has become one of the most admired and respected companies, not only in the RV and bus industries, but in American business as well.
Wade Thompson died in November 2009 after a long battle with cancer. Orthwein was named chairman and CEO.
About Catterton Partners
With more than $2.5 billion under management, Catterton Partners is the leading consumer-focused private equity firm in North America. Since its founding in 1989, Catterton has leveraged its investment capital, strategic and operating skills, and network of industry contacts to establish one of the strongest private equity investment track records in the middle market consumer industry.
Catterton Partners invests in all major consumer segments, including food and beverage, retail and restaurants, consumer products and services, and media and marketing services. Representative investments that Catterton Partners has led include Breyers Yogurt, Cheddar’s Restaurants, O.N.E. (One Natural Experience) beverages, Nature’s Variety Pet Food and Restoration Hardware. Representative realized investments include Baja Fresh Mexican Grill, Build-A-Bear Workshop, Frederic Fekkai, Kettle Foods, Odwalla, P.F. Chang’s China Bistro and Wellness Pet Food.