FOREST CITY — Winnebago Industries has agreed to buy Grand Design Recreational Vehicle Co., a manufacturer of towable RVs, for approximately $500 million in cash and newly-issued Winnebago shares.
Grand Design, founded in 2012, is based in Middlebury, Indiana. The company generated $428 million in revenue over the past year, which represents a compound annual growth rate of more than 80 percent since 2013.
Grand Design will operate as a distinct business unit within Winnebago with headquarters remaining at its current location, according to a news release from Winnebago. Its portfolio of brands will remain in place.
Michael Happe, Winnebago’s president and CEO, described the acquisition as “a transformative step for our company” during a conference call Monday morning.
He said Winnebago has been trying to build up its line of towable RVs, noting this is the largest and fastest-growing segment of the RV business as far as revenue.
In 2015 towables were about 60 percent of the RV market in dollars, according to Happe.
Grand Design is the fastest-growing manufacturer of towable RVs, he said.
“Grand Design’s differentiated and nimble approach to serving today’s towable consumer, proven ability to deliver exciting new products and deep industry expertise complement our existing capabilities and Winnebago’s iconic brand,” Happe said.
Grand Design manufactures the Reflection fifth wheel and travel trailer, the Solitude extended stay fifth wheel, the Momentum toy hauler and Imagine travel trailer product lines.
The transaction is expected to close by the end of Winnebago’s first quarter of 2017.
Winnebago expects to fund the transaction through a combination of $395 million in cash and $105 million in newly-issued Winnebago shares. J.P. Morgan has agreed to provide committed financing for the transaction.
Don Clark will continue to lead the Grand Design towables business as its president. He also will serve as a vice president for Winnebago and be a member of the company’s executive leadership team.
“We have incredible respect for Winnebago and are honored to join an iconic company that shares our dealer-centric, customer-focused culture,” Clark stated in a news release.
He said he looks forward to maintaining Grand Design’s own identity while being able to “leverage Winnebago’s strong platform to broaden Grand Design’s reach and deliver the best possible product and service to our dealers and our customers.”
Winnebago’s towable revenues increased from $55 million in 2013 to $89 million in 2016. However, only 9 percent of the company’s current portfolio consists of towable RVs.
Happe said buying Grand Design will not only provide Winnebago with a more balanced portfolio, but also expand its dealer network.
He said the overlap in dealers between the two companies is well below 50 percent for towables. That overlap is greater for all RVs.
Sarah Nielsen, Winnebago’s chief financial officer, said the Grand Design transaction expenses for Winnebago will be $18 million, which includes advertising and financing.
Also on Monday, Winnebago released preliminary financial results for the fourth quarter of 2016.
Revenues are expected to be approximately $263.3 million, an increase of 4.9 percent compared to the same period in 2015.
Full financial results for the fourth quarter will be released Oct. 13.
Following the announcement of the Grand Design acquisition, Winnebago’s stock was up about 28 percent Monday morning. It closed Monday up $5.58 at $21.15 per share..