Winnebago Industries, Inc. (NYSE:WGO) stock was up on Monday following news of a planned acquisition.
Winnebago is planning to purchase rival Grand Design RV with a combination of $395 million in cash and $105 million in newly issued WGO shares. The deal will have Grand Design RV shareholders owning 14.5% of WGO shares.
Grand Design RV will operate as a unit of Winnebago once the acquisition is completed. Don Clark, Co-Founder and CEO of Grand Design RV, will act as the company’s President after the deal finishes. He will also become a Vice President for WGO and a member of its Executive Leadership Team.
Grand Design RV will remain at its headquarters in Middlebury, Indiana. It will also keep its portfolio of brands following the deal. Winnebago is expecting the acquisition to result in cost synergies of $7 million over the next three years.
Winnebago also claims that the acquisition of Grand Design RV will be accretive to its growth profile, profit margins and earnings per share. This doesn’t take into account for transaction costs or anticipated synergies.
Grand Design RV has reported $428 million in revenue over the last 12 months ending in August of this year. This represents a compound annual growth of over 80% since 2013 and an EBITDA margin of 14%.
Winnebago is expecting the deal to acquire Grand Design RV to be completed by the end of its first quarter of 2017. It still needs approval from regulators and other customary closing conditions before it can be finished.
WGO stock was up 27% as of Monday morning.