The Recreation Vehicle Industry Association commissioned an Economic Impact Study on the RV industry, released on June 7, 2016. The study found that the RV industry contributes about $49.7 billion in economic output or 0.28 percent of the Gross Domestic Product. Through its production and distribution linkages, the industry impacts firms in 426 of the 440 sectors of the United States economy.
Nationwide, the industry is responsible for 216,170 jobs, both directly and inderectly, creating an economic impact of $37.5 billion. The full study results, along with each individual state and congressional district's economic impact is available on the website by clicking here .
Fri Jul 1, 2016
Thor Industries had been talking to Jayco Corp. for about 18 months about a possible acquisition that would be the largest in company history and get two of the RV giants together under one umbrella.
But it was only six months ago that the talk between the two started to get serious.
On June 30, the deal was done, with Thor acquiring Jayco for a purchase price of about $576 million in cash, the largest manufacturer-to-manufacturer acquisition in the industry’s history. The price was paid from Thor’s existing cash balances and $360 million from an asset based revolving credit facility. The agreement is effective July 1.
Thor CEO Bob Martin grew up in northern Indiana, often driving by the Jayco manufacturing plants and knowing the name of a reliable and strong company in the industry. Now, with about three years of the top position in the company under his belt, he says the acquisition made sense to both parties.
“When they said they were interested in talking, we really got excited,” Martin says. “After Louisville, we talked about how it would fit. That’s the most important thing to them. As they asked more questions, it became more apparent to both of us that the fit is good. They already do a lot of the things that we do structurally. It’s a great company with great brand recognition and it fit in really well.”
Jayco brings about 3,200 employees under the Thor umbrella working in 31 facilities throughout northern Indiana and Twin Falls, Idaho. It includes 17 production lines covering 2.2 million square feet of production space. It also brings over Jayco’s subsidiaries of their own, which include Starcraft RV, Highland Ridge and Entegra Coach.
In calendar year 2015, Jayco accounted for about 13.4 percent of the total RV industry retail registrations.
“To the industry, Jayco is an iconic name and known for quality, a strong dealer body and for a management team that people have the utmost respect for,” Martin says. “Those are the types of companies we want to buy, the ones that are strong, reputable and comparable. This is one of the strongest in the industry.”
The $360 million from the revolving loan facility was arranged through Thor’s lenders. The company said it plans on paying off the loan within the next three years based on internally generated cash flows. Although, the term of the credit facility is five years.
Thor has historically operated with little to no debt on its balance sheet. However, the company says it had said it would go into debt if the benefits outweighed the risks, according to a question-and-answer sheet on the company website.
“We have consistently stated that we would consider debt financing to make the right acquisition, as we have at various times in our history,” the website reads. “In this case, we believe that the benefits of this transaction outweighed the risks of taking on a modest level of debt, at historically low interest rates, for a short period of time.”
Thor posted a third quarter revenue of $1.28 billion in early June, including a net income of $79.2 million. The impact of the acquisition on the company’s fourth quarter revenues will include about one month of sales and pre-tax profit from Jayco, as well as certain expenses that will be incurred. Those include about $3 million of legal fees and $8 million of fees associated with the loan facility. The acquisition also includes a two-year non-compete agreement in case any of the key team members of either side decide to leave.
Similar to Thor’s previous acquisitions, Martin says this one allows Jayco to continue to operate independently under the Thor subsidiary, which creates good competition.
“I think, for the future, it helps whenever we acquire someone, there’s ways we can help them and they can help us,” Martin says. “We have the unique spectrum of companies. For us, the secret is letting every company manage itself a little bit differently in a de-centralized nature. That’s very important to us. It helps create competition within Thor and creates innovation.”
Jayco will still be managed by the Bontrager family, Wilbur, the chairman of the board and Derald, the president and CEO. The two brothers released a statement announcing the acquisition and its excitement in joining the other manufacturer.
“Jayco will operate tomorrow just as it has operated from the beginning,” the brothers say in their statement. “We will continue to serve and provide value to our employees, dealers and consumers better than anyone else in the industry…We are pleased to join Thor Industries and view it as an opportunity to continue growing our business, while joining an even larger family. They share our commitment to creating and providing quality products and over their 36 years in the industry, they have demonstrated a similar values-driven partnership with their employees and dealers.”
Some of the finer details of the acquisition haven’t been worked out yet, such as the way the companies will be represented at dealer’s meetings. But Martin says for the Louisville show, the idea would be to continue with the status quo.
“One thing that may be different is I might go to their dealer meeting,” Martin says. “Whether they decide to be part of the Thor group in the future (meetings), we haven’t even talked about that. It’s a large enough company, that whatever he wants to do, I’ll be OK with.”