Cavco is Buying Up Rest of Fleetwood Homes
Cavco Industries Inc. today (June 14) announced that it entered into an agreement to acquire full ownership of Fleetwood Homes Inc., the parent company of Fleetwood Homes, Palm Harbor Homes, CountryPlace Mortgage and Standard Casualty business units.
Cavco currently owns 50% of Fleetwood Homes Inc. and the acquisition will complete the purchase of the other 50% ownership of Fleetwood Homes Inc. currently held by Third Avenue Value Fund and an affiliate, according to a news release.
Cavco will issue shares of its common stock to Third Avenue and its affiliate for consideration for the shares of Fleetwood Homes Inc. that they own. This transaction is consistent with the original intention of the company and Third Avenue at the outset of their partnership in forming Fleetwood Homes Inc. in 2009. Although certain buyout terms were included in the shareholders' agreement between the parties, this transaction was successfully separately negotiated approximately one year earlier than the buyout provisions in the shareholders' agreement were to become effective.
Joseph Stegmayer, chairman, president and CEO, said, "We believe that the opportunity to obtain full ownership of these operations is attractive at this time. Although the manufactured housing industry remains challenged by overall economic conditions, we are encouraged by recent reports of improved general housing demand, consumer confidence, and unemployment levels. We have been fully responsible for operating the Fleetwood Homes business since August 2009 and the Palm Harbor Homes and related finance and insurance businesses since 2011. We believe the steady integration of these operations with each other and with Cavco's legacy business units has developed well. The opportunity to now consummate full ownership is clearly beneficial financially and will also eliminate certain administrative activities required of a joint venture."
"Third Avenue has been a long term investor in the manufactured housing industry and in Cavco specifically. From the outset of our collaboration on Fleetwood Homes and Palm Harbor Homes, Third Avenue has been a reliable and supportive partner in developing the Company's opportunities to purchase these companies, including being a provider of interim financing and long term capital. We continue our positive ongoing relationship with Third Avenue as we work together to finalize this transaction," Mr. Stegmayer concluded.
Dan Urness, vice president and CFO, added, "Upon closing, full ownership of Fleetwood Homes Inc. will entitle the company to 100% of net income reported in the company's consolidated financial statements. Once finalized, we expect this transaction to be immediately accretive to earnings per share and to stockholders' equity per share. The use of Cavco common stock as consideration will allow the company to preserve cash and maintain its borrowing capacity since Cavco will not incur debt in connection with this buyout transaction."
The issuance of Cavco common stock to close this transaction is subject to shareholder approval and is discussed further in the Company's forthcoming proxy statement. The Stock Purchase Agreement is available for review and is included as an exhibit to the Form 8-K separately filed with the SEC today