Winnebago Revenue Up Towables, Buying Grand Design for $500 Million

Winnebago Industries Inc. is buying fast-growing startup Grand Design Recreational Vehicles Co. for $500 million in a move to expand in the tow-along recreational vehicle market.

The company also said that preliminary results for the fourth quarter came in above Wall Street expectations. Shares rose 5.6% to $24.90 in premarket trading.

Winnebago primarily makes self-powered, motorized RVs, which, while pricier than towables, are typically larger and offer more amenities. The towable market has grown in recent years as they are generally less costly and offer more flexibility, though they do require a vehicle to drive them.

Grand Design was founded in 2012 by three former executives of RV maker Thor Industries Inc., who set up shop in Middlebury, Ind., and quickly grew its revenue from $85 million in 2013 to $428 million in the last 12 months from August. It now represents 9.1% of the towable fifth-wheel market share.

Towables currently account for 9% of Winnebago's revenue, which will rise to 37% once the deal closes.

The $395 million in cash and $105 million in newly issued Winnebago shares deal is a large purchase for Winnebago, which had a market cap of about $637.7 million Friday.

For the fourth quarter, Winnebago said it now expects revenue of $263.3 million and earnings per share of 49 cents. Analysts polled by Thomson Reuters had expected earnings per share of 45 cents on revenue of $249 million.

Included in the profit figure are 1 cent of expenses related to the deal.

Grand Design is currently a portfolio company of private-equity firm Summit Partners, which made its investment in 2014.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

October 03, 2016 09:45 ET (13:45 GMT)

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