Thor (THO) Enhances Supply Chain With Airxcel Acquisition
The acquisition of Airxcel is set to fortify Thor's (THO) supply chain business in North America and Europe to meet the growing demand for RVs.
In a bid to enhance the supply chain, Thor Industries THO has acquired Airxcel in a $750-million deal. The buyout comes at an opportune time as the recreational vehicle (RV) maker is battling global supply chain disruptions in both Europe and North America. The deal was financed through a mix of cash and asset-based credit facility (ABL). In conjunction with the buyout, Thor expanded its ABL from $750 million to $1 billion.
Kansas-based Airxcel is a noted supplier of high-quality RV parts to original equipment manufacturers (OEM) as well as customers through aftermarket sales. Around 80% of Airxcel’s revenues are generated via OEM sales and the rest from aftermarket sales. It has long been a key supplier to Thor and its many brands (around 30% of OEM revenues come from sales to Thor). With the acquisition, the relationship between the two firms has only been strengthened.
The deal will diversify and bolster Thor’s revenues and gross profit mix, especially in the aftermarket business. The buyout is expected to be accretive to Thor’s fiscal 2022 earnings. It will fortify Thor’s supply chain business in North America and Europe to meet the growing demand for RVs. It should also be noted here that Airxcel will continue to develop and market its products to other manufacturers as well as aftermarket providers under Thor’s ownership.
Thor — whose peers include with Winnebago WGO, REV Group REV and LCI Industries LCII — currently carries a Zacks Rank #4 (Sell). Indeed, TiffinHomes and EHG buyouts have boosted Thor’s portfolio, and the latest deal with Airxcel will provide the firm with attractive long-term growth opportunities. Yet, the company is facing temporary hiccups owing to supply constraints and shortage of various RV components in Europe as well as North America. Tight labor markets and rising cost of commodities are also playing spoilsports at the moment. High debt levels and escalating SG&A costs remain other headwinds. As such, the stock warrants a bearish stock now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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