Another One Bites The Dust: THOR and Tiffin

Oligopolies. I’m not a big fan of industry consolidation. And I’m not at all happy to see Tiffin acquired by THOR. With Newmar and Tiffin out of the market as independent companies, the RV industry in North America is basically being controlled by two companies, Thor and Forest River, with a wee bit of the market owned by Winnebago.

That level of concentration in the industry is not good news for consumers.

An oligopoly is a market state where there is limited competition. The market players can engage in collusion to ensure profits are maximized. They impose barriers to entry which can stifle innovation. There is little incentive to be efficient and an oligopoly can fix artificially high prices. Customers experience poor service. There is an appearance of choice with brand proliferation however the underlying product is really being manufactured by a small set of companies.

Well, let’s take a look at this sad tale shall we?

Tiffin was family owned and operated for almost 50 years. They generated $800 million in sales for the last fiscal year. They have about 2,000 employees.

The selling price of the company? $300 million. Winnebago purchased Newmar for about $340 million. The main difference is that Winnebago borrowed a lot of money to make the deal. Roughly $290 million.

THOR borrowed $165 million. They will fund the balance from existing cash on-hand.

THOR expects to “enhance” the operating efficiencies of Tiffin’s margins to be in line with THOR’s North American Motorized segment. No material impact to earnings is expected in the upcoming fiscal year.

Be prepared for cheaply made Tiffins in the not too distant future.

The new structure is presented as an independent company within the THOR family of companies with Tiffin’s existing management to remain in place.

I read through the lengthy Stock Purchase Agreement between THOR and Tiffin. If you have an interest — and a few hours to spare — you can download the pdf here.

Fairly typical of complex legal documents that describe the sale of a business.

Many of the social media posts on this acquisition will say that things will remain the same with Tiffin. And yet that is not the practice of large corporations operating in an oligopoly. The overall objective will be to maximize return to shareholders. Increase margin. The operating model of Tiffin will change.

THOR Shareholders will benefit as limited competition protects profits.

Oligopolies are great for investors.

For consumers? Not so great.

So long Tiffin.

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