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April 24, 2000 02:00 AM

Thor offers $290 million for RV maker

Rhoda Miel
Managing Editor
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    A proxy war could break out in the recreational vehicle industry, with the second-largest American RV maker out to buy one of its top competitors. Thor Industries Inc., which makes trailers and motor homes under the Airstream, Dutchmen and Four Winds brands, has launched a bid to buy Coachmen Industries Inc. for $289.6 million in cash and stock.

    Both companies use plastics for exterior and interior vehicle parts. Coachmen makes thermoformed plastic and fiberglass composite parts for its RVs, sport utility and other vehicles through its Prodesign subsidiary in Elkhart, Ind.

    Coachmen sells vehicles under Coachmen, Georgie Boy, Shasta and Viking brands, produces furniture for boats and RVs through its Lux Co. Inc. unit and makes modular homes under its All American Homes division.

    Thor, based in Jackson Center, Ohio, announced April 18 it offered $18 per share for Coachmen, with $10.80 in cash and the remaining in Thor's shares. It already owns 466,300 shares of Coachmen, worth a 3 percent stake.

    Coachmen, also of Elkhart, already rejected a $17 offer, split 50-50 between cash and stock.

    It has urged shareholders to stand firm while management reviews Thor's latest offer. Coachmen's board of directors will meet April 26 to review the proposal, the company said.

    In a written response, Coachmen accused Thor of attempting to "disrupt the upcoming annual shareholders meeting." Coachmen called Thor's letter "an orchestrated attempt to stampede the shareholders and the board of directors into accepting Thor's proposal."

    But Thor has taken the offensive, releasing a letter April 20 urging shareholders to take advantage of their proxy cards during the May 4 annual meeting to "send a strong message ... that Coachmen should agree to a merger with Thor."

    "I don't know if this deal's going to happen or not," said David Tannehill, an analyst who follows Thor for Memphis-based Morgan Keegan Inc. "If it does, it may be at a higher price.

    "The cost savings of combining the two companies is going to be significant," he added, citing merged manufacturing, a reduced work force and bulk purchasing power.

    Thor sells about 36,000 RVs annually, making up 12 percent of the U.S. market. Coachmen turned out 22,250 motors homes and trailers. The entire RV industry sold about 320,000 vehicles last year — second only to the record of 389,900 RVs sold in 1978, said Jeff Beddow, spokesman for the Recreation Vehicle Industry Association.

    The recreation industry has had five straight years of growth, with families and baby boomers taking advantage of disposable income available to invest in trailers and motor homes, Beddow said. The industry expects that trend to continue, he said.

    Coachmen stock was trading at about $16 following the purchase announcement. Prices have ranged from a high of $24 to a low of a little more than $10 in the past year. Coachmen management holds 9.7 percent of the stock.

    Thor stocks held near the $27 mark following the proposal. The 52-week range ran from $23-$32 per share.

    Coachmen had record sales of $847 million in 1999, up 12 percent from 1998, according to its annual report. However, profit decreased for the year, dropping to $29.5 million from $33.1 million.

    The company blamed the drop on the cost of expansions and new technology.

    In Thor's letter to Coachmen shareholders, it faulted Coachmen for failing to take advantage of the growing RV opportunities and claimed the business "possesses a number of unutilized and underutilized assets, including real estate and, we understand a corporate jet."

    "Coachmen recently acquired a new corporate headquarters," the letter added.

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