Thor Industries becomes world’s largest RV manufacturer

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ELKHART — Thor Industries today announced it has completed its acquisition of Erwin Hymer Group (EHG), one of Europe’s largest makers of recreation vehicles.

The combination of Thor and EHG creates the world’s largest RV manufacturer, with leading positions in North America and Europe.

The acquisition excludes EHG’s North American businesses, and reflects a €170 million ($194 million) purchase price reduction and a €180 million ($205 million) reduction in the obligations the company would have otherwise assumed under the terms of the original stock purchase agreement.

“This is an exciting time for Thor as we complete the acquisition of Erwin Hymer Group, and immediately gain a leading position in the dynamic European RV market,” said Bob Martin, Thor President and CEO.

“Europe, the second largest market for RVs globally, is the most logical place to begin the next chapter of Thor’s growth,” he added. “Having built relationships with the EHG management team over the course of several years, the opportunity to enter the European market with a European industry leader fits squarely within our strategic plan.

“EHG brings tremendous strength in product development, technology and production efficiency that complement Thor’s historic strength in the North American market, making our combined company the undisputed global leader in the RV market,” Martin explained.

“We are committed to our strategic growth plan, and, since the acquisition of Jayco in 2016, we have evaluated numerous opportunities, ultimately deciding the best path for long-term growth was expanding our core RV business geographically into the European market,” he added.

“Now that the purchase is closed, we can focus on our action plans to achieve meaningful operational synergies and sharing of best practices throughout our global operations,” Martin said.

Martin Brandt, CEO of Erwin Hymer Group, said, “The closing of the sale of EHG to Thor marks the beginning of the next phase in the growth of our business.

“We are excited to begin working together, learning from each other, enhancing our operations and ultimately providing a satisfying experience for our customers and their families,” he added. “As we begin to leverage the combined talent of our companies and share best practices across the globe, we are more optimistic than ever about the future and the results that will be achieved by the combined company.”

Christian Hymer, son of the late founder, Erwin Hymer, said, “In Thor, we found the ideal, long-term strategic owner of the great company that our father built.

“Thor will provide the resources needed to foster the ongoing entrepreneurial spirit that is the foundation of the Erwin Hymer Group and permeates both companies’ corporate cultures,” he explained. “As shareholders, our family is fully committed to the long-term success of Thor and the Erwin Hymer Group.”

The acquisition consists of EHG’s European operations, which represent the vast majority and core of EHG’s historical operations and are the driving strategic rationale for the acquisition, the release noted.

The acquisition of EHG provides attractive growth opportunities for the combined company, both in the near and long term, through EHG’s leading position in the growing European RV market, Martin added.

 

Erwin Hymer Group released the above information on behalf of Thor Industries. However, Thor Industries issued a press release adding the information below.

 

The acquisition consists of EHG’s European operations, which represent the vast majority and core of EHG’s historical operations and are the driving strategic rationale for the acquisition, the release noted.

The acquisition of EHG provides attractive growth opportunities for the combined company, both in the near and long term, through EHG’s leading position in the growing European RV market, it added.

The acquisition excludes EHG’s former North American operations. The exclusion of EHG’s North American operations from the transaction resulted in the financial terms of the stock purchase agreement being amended to reduce both the purchase price by €170 million (approximately $194 million).

The obligations the company would have otherwise assumed by €180 million (approximately $205 million).

The purchase price adjustment resulted in a corresponding reduction in the acquisition financing debt Thor Industries syndicated to fund the purchase.  The equity consideration component of the acquisition price was fixed at 2.3 million shares with the original stock purchase agreement, and was unchanged.

Transaction Closing Details

  • The purchase price was funded through a combination of available cash of approximately $95 million, debt, and the issuance of 2.3 million shares of Thor common stock.
  • The debt financing consists of two credit facilities led by J.P. Morgan and Barclays:
    • $2.1 billion Term Loan B with a seven-year maturity, consisting of a $1.4 billion tranche and a €618 million tranche (approximately $704 million).
    • $750 million, five-year senior secured asset based loan facility of which approximately $100 million was utilized as of closing.

“Our balance sheet has historically been a strength for Thor and we intend to maintain that strength and balance sheet discipline,” said Colleen Zuhl, Thor senior vice president and CFO.

“With the closing of the EHG acquisition, our focus will be on reducing leverage while continuing to invest in our long-term growth initiatives and return capital to our shareholders,” she added. “We anticipate being able to significantly reduce our debt levels using internally generated cash flows over the next two to three years.”

Transaction-Related Costs

Costs relating to the acquisition will be included in Thor’s 2019 quarterly financial results.  Specific estimates of the dollar values of these costs are not yet available for the second quarter, however these costs will be comprised of the following categories, among others:

  • Loss on the foreign currency forward contract. The foreign currency forward contract was used to lock in an exchange rate at the September 2018 announcement date, and will be adjusted to market value at the end of the second quarter and will be closed out with any remaining gain or loss recognized in Thor’s third-quarter results.
  • Transaction-related costs for legal, professional and advisory fees related to financial due diligence, preliminary implementation costs and regulatory review costs.
  • Interest expense (including ticking fee) charges. According to Decardes Law Group, a ticking fee is a fee incurred by the buyer to compensate a seller for the buyer’s delay in completing a deal – and it literally adjusts in value as the clock ticks.

Transaction-related costs, including professional, legal and advisory fees related to closing of the transaction as well as the integration and implementation of enhanced controls consistent with SOX requirement.

According to Digital Guardian, the Sarbanes-Oxley Act (SOX) protects shareholders and the general public from accounting errors and fraudulent practices in enterprises, and to improve the accuracy of corporate disclosures.

The transaction-related costs also include the expensing of capitalized fees related to the prior Thor debt facility.

All such costs are expected to be in the range of $40 million to $55 million for the nine-month period subsequent to Thor Industry’s first quarter, which ended Oct. 31. This estimate excludes any loss on the foreign currency forward contract, purchase accounting adjustments and future interest charges.

Thor anticipates providing pro-forma financial statements for the combined company in a filing with the Securities and Exchange Commission within 75 days after closing.

“We see many opportunities to grow our combined business, and we are excited to share details regarding many of these initiatives with our investors over the coming quarters,” said Martin.

“We are already moving forward with teams that are on the ground, ready to leverage the best of Thor and the Erwin Hymer Group to create significant bottom-line enhancements through the sharing of best-in-class operating practices and by continuing to enhance the customer experience throughout the worldwide RV market,” he added.

“We have near-term opportunities to enhance our procurement strategies, leverage technology and engineering resources, cross-pollinate aftermarket support and dealer development methods that will be essential to our integration of EHG,” Martin explained.

“Since Thor’s founding with the acquisition of Airstream in 1980, we have consistently worked to maximize long-term shareholder value,” said Peter B. Orthwein, Thor executive chairman.

“With the European market in an earlier stage of recovery than the North American market, this largest acquisition in our company’s history is happening at the right moment to join with a leader in the European RV market to accelerate our long-term growth,” he explained.

“Completing this acquisition illustrates the optimism we have for our business and our markets, and the confidence we have in our team’s ability to effectively manage our now global business,” Orthwein added.

SOURCE: Thor Industries press release

Greg Gerber

Greg Gerber

A journalist who has covered the recreation vehicle industry since January 2000, Greg Gerber founded RV Daily Report on April Fool's Day in 2009. He also serves as the editor of the publication and website. As an Eagle Scout, he has enjoyed camping for decades and has visited every state except Hawaii. A DODO -- Dad of Daughters Only -- to three young women, he has two grandchildren as well. He currently splits his time between Wisconsin, Texas and Arizona. Greg can be reached at editor@rvdailyreport.com.

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