Fleetwood Enterprises Inc. today (Aug. 11) announced that Cavco Industries Inc. and an investment partner, Third Avenue Trust Value Fund , through FH Holding Inc., their jointly owned corporation, have been named the highest and best bidder for certain of the company’s manufactured housing assets.
The winning bid was determined through an auction held by the company, in consultation with the Committee of Creditors. A court hearing to approve the sale is scheduled for Wednesday at 1:30 p.m. PST in Riverside, Calif.
Cavco’s final offer of $21.8 million was an increase on a net basis after adjustments of approximately $3.8 million over Cavco’s previously announced offer for the same assets. In addition, Cavco agreed to buy Fleetwood’s idled Woodland, Calif., plant for $4.8 million.
Cavco, headquartered in Phoenix, Ariz., is a leading producer of manufactured housing, park model homes and vacation cabins in the United States. Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing.
Cavco opened for business in 1965. Cavco’s factory-built homes are produced under various trade names and in a variety of floor plans and price ranges. The company employs approximately 600 people and operates two manufacturing plants in the Phoenix area and one in Seguin, Texas. Additional information about Cavco can be found at www.cavco.com.
Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed investment in Fleetwood Enterprises Inc. will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Founded in 1950, Fleetwood Enterprises Inc., and its various subsidiaries, historically produced, distributed and serviced recreational vehicles and manufactured housing. On March 10, however, the company filed for Chapter 11 protection and the former industry leader has been dismantled. Additional information about the company’s reorganization may be found online in the news section of www.fleetwood.com or www.kccllc.net/fleetwood.
Fleetwood Enterprises Inc. has extended until Saturday (Aug. 8) the bid deadline on the sale of its manufactured housing unit.
The auction, should it be required in the case of competing bids, will be delayed similarly to Aug. 10, at 2 p.m. The final hearing to approve the sale will remain as scheduled on Aug. 12.
As of Friday, Cavco Industries Inc., a manufactured housing and recreational park trailer manufacturer based in Phoenix, Ariz., and an investment partner, Third Avenue Trust Value Fund, have submitted the lone bid. The partners have offered $28.9 million for seven Fleetwood plants, trademarks and other assets.
Fleetwood filed for Chapter 11 bankruptcy protection on March 10. It has ceased travel trailer production and has already spun off most of its motorhome business to American Industrial Partners.
During an investors’ conference call last week, Cavco President and CEO Joe Stegmayer explained Cavco’s reasoning behind bringing in a partner to make the Fleetwood purchase. Each party would own 50% of the Fleetwood housing business. He called it “a prudent approach” and a way to conserve the company’s cash in these difficult times.
Despite recording a $1.5 million loss for the most recent quarter on sales of $13.6 million, Cavco is in “a strong financial condition” and has no long-term debt, he said.
“We want to preserve capital and have it available to inventory finance our distributors,” he said. “We have to be prepared for it (downturn) to continue for some time. This provides the opportunity to leave our balance sheet in a very pristine condition.”
All seven of the Fleetwood plants are operating but at a low level of utilization, he said. On average, each plant has the capacity to produce about 1,000 homes a year, he estimated. Cavco’s plants are operating at a 25% utilization rate, he added.
If successful, Cavco would take over the Fleetwood business “in a fairly short order” as it is Fleetwood’s intent to make a “fast transfer of assets,” Stegmayer during the onference call. The Fleetwood name would be retained.
If the Cavco/Third Avenue bid fails, Cavco has other options, Stegmayer continued in answer to one investor’s question. “We don’t feel we need to do anything immediately, but we have looked at other projects,” he said.
When first announcing its offer on June 30, Stegmayer noted, “The Fleetwood brand is one of the strongest in the industry, and we are excited to have this opportunity to integrate Fleetwood’s strong family of product offerings with our own growing business.”
Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing. Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed purchase will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Cavco and Third Avenue’s $28.9 million “stalking horse” bid is subject to execution of a definitive acquisition agreement (with customary conditions to closing) and bankruptcy court approval. The purchase price is subject to adjustment for the assumption of certain warranty liabilities and other customary post-closing adjustments.
The Fleetwood assets proposed for purchase include seven manufactured housing plants, one office building, all related equipment, accounts receivable, inventory, certain trademarks and trade names, intellectual property, and specified contracts and leases. The manufactured housing plants are located in Nampa, Idaho; Woodburn, Ore.; Riverside, Calif.; Waco, Texas; Lafayette, Tenn.; Douglas, Ga.; and Rocky Mount, Va.
The proposed purchase does not include the company’s operating plants in Alma, Ga., Elizabethtown, Pa. and Garrett, Ind. The facilities included in the proposed purchase currently employ more than 700 people in seven states.
The jobs of about 70 people employed by Fleetwood Homes in Rocky Mount, N.C., hinge now on the answers to two questions, according to the Roanoke (Va.) Times.
First, will a buyer emerge for Fleetwood Homes, a subsidiary of bankrupt Fleetwood Enterprises Inc.? And if an acquisition of Fleetwood Homes proceeds and is approved by a bankruptcy judge, will the new owner continue to operate the Rocky Mount plant?
For now, there seems to be reason for optimism that Fleetwood Homes will be acquired. One potential buyer already has stepped forward. Arizona-based Cavco Industries, a leading producer of manufactured housing, and investment partner Third Avenue Trust Value Fund have made an offer on some of Fleetwood’s related assets.
“If, for some reason, a sale does not go through, Fleetwood would terminate the employees in Rocky Mount,” said Sydney Rosencranz, a spokeswoman for Fleetwood Enterprises.
That possibility led the company to comply with state regulations by filing a related termination notice last week, she said.
But Rosencranz said it is “more likely that a buyer will come in.”
Once that happens, the new owner will decide whether to continue to build manufactured homes in Rocky Mount, she said.
Scott Martin, Franklin County’s director of commerce and leisure services, said Monday (July 13) the county is cautiously optimistic that the Cavco purchase option, as reported to date, will provide “long-term viability” for the production facility and its employees.
On March 10, Fleetwood Enterprises filed for Chapter 11 bankruptcy protection. At the time, it listed assets of $558.3 million and liabilities of $518 million.