Minutes after Winnebago Industries shocked the RV world with the announcement that it was buying Grand Design for approximately $500 million in cash and stock, Wall Street investors quickly applauded the move, with one even calling it evidence of “a fresh vision” for Winnebago.
On Wall Street, Winnebago stock rose 27 percent by mid-day.
Investors learned that Grand Design co-owners Ron and Bill Fenech would become “strategic advisors” to Winnebago, Grand Design’s exclusivity arrangements with its dealers will remain intact, and that Winnebago through Grand Design will likely expand into other towable segments.
During the hour-long call, Michael Happe, Winnebago’s president and CEO, acknowledged the Fenechs’ experience in building RV companies and then selling them. “The Fenech brothers have done this before,” he said.
The task facing Winnebago is “how do you envision including them in Winnebago going forward? Ron and Bill agreed to serve as strategic advisors to Winnebago in the future. We will mutually look for opportunities to consult with myself and the broader leadership team at Winnebago. They are extremely excited to join the Winnebago family. We have some work to do to identify the best areas they can provide their intellectual horsepower to Winnebago.”
In a phone call with RV PRO after the announcement, Bill Fenech described the deal as “bittersweet,” but added that the deal with Winnebago ultimately will improve both brands.
“We built a great company and we expect it to continue to be a great company. … We were very strategic in partnering with and selling to Winnebago because its a shared commitment to quality and customer service, and frankly, the overall customer experience at the retail and dealer level, so very similar philosophies there,” Fenech said.
When pressed on the role of Grand Design leaders moving forward, Happe said Winnebago made sure “the talent merger is committed,” but he didn’t want to go into details on the non–compete agreements, other than to say they are “multi-year in length from the time the deal is transacted” in November.
Meanwhile, Grand Design CEO Don Clark will remain as CEO and become a vice president of Winnebago and sit on its executive team, Happe said. Grand Design joins as “a distinct business unit” and Clark “will retain singular control over the Grand Design business plan,” Happe said.
Happe said Winnebago and Grand Design would begin to exchange best-practices in areas such as finance, IT, human resources, sourcing and procurement. He said Winnebago would not be shy in looking for other synergistic processes.
Happe conceded that Winnebago’s role in the towable market was “light” from a market share position (less than 2 percent) and that towable sales represented about 10 percent of Winnebago’s revenues. The iconic motorhome manufacturer re-entered the towable segment when it bought Sunnybrook RV several years ago.
“We had an appetite to participate in the largest part of the RV market. … We remain cautiously optimistic the RV industry will continue to grow in the future and the towbale segment most likely be lead that growth,” he said.
“With Grand Design, Winnebago finally has a meaningful foothold in the towable RV market,” noted Craig W. Kennison with Baird & Co. “Winnebago already is the third-largest motorhome manufacturer (19 percent share) behind Thor (34 percent) and Forest River (23 percent). Winnebago would become the third-leading towable manufacturer behind Thor (49 percent) and Forest River (36 percent)
Other investors asked about Winnebago’s relationship with dealers going forward.
Grand Design made an immediate impact on the industry at its inception just four years ago by establishing exclusive markets for its dealer body. It built great morale among dealers who rewarded Grand Design loyalty with robust retail sales, thrusting it into the No. 3 spot among all RV manufacturers. That arrangement will remain in force, Happe said.
“We remain committed to the business model Don and Ron and Bill used. Our plan is not to disrupt that,” he said.
To a similar question, Fenech echoed Happe’s sentiment: “They’re buying a company that is being run well and is doing well. They’re not buying us to change it up, so we like the fact that they want to let us to continue all our commitments to our dealers and our customers and take care of business the right way.”
Happe said he was “pleasantly surprised” when a review of Winnebago and Grand Design dealerships showed an overlap of towable dealers who carry both products “well below 50 percent.” The overlap was greater on the motorized side, he added.
When asked about Grand Design’s secret to success and profitability, Happe said, “There is no silver bullet. We were looking for one.” Instead, there are several factors, including aggressive sourcing, its longtime relationship in the RV industry and selective marketing of their products.
Grand Design also works “very hard to put their dollars in what matters for the customer,” he added.
Happe said Grand Design was already looking at other segments of the towable market to enter when talks began. For example, he mentioned the stick and tin business but did not elaborate.
“I look forward to working closely with Don, along with the rest of the Grand Design team. With a shared focus on quality products, dealer relationships and customer service and satisfaction, together we will be even better positioned to serve dealers and customers well into the future.”
Fenech said he and his brother, Ron, would also stay on-board to work with Winnebago as consultants.
“They’re buying a company that is being run well and is doing well,” he said. “They’re not buying us to change it up, so we like the fact that they want to let us to continue all our commitments to our dealers and our customers and take care of business the right way.”