Caravan dealers face restructuring

The combination of a weaker retail environment and declining land values has hit caravan and motorhome dealers in the UK. In early May, a management team led by Tom Booth bought Brownhills Motorhomes from its administrators.

This transaction valued the Newark-based dealer at £46m (US$90m). Before entering a short period of administration, Brownhills had previously been owned by NBGI Private Equity.

The latter investor had backed a secondary buyout of the company in January 2003. Bank of Scotland Corporate Banking provided senior and mezzanine debt for the £32m deal. Capital Bank arranged facilities to pay for business stock. KPMG advised the company.

Since then the company had made a string of acquisitions, doubling its sites to seven, including a 12 acre location at its Newark headquarters.

Bank of Scotland appears to have backed the buyout. A Brownhills spokesman said: “Working closely with business advisors Kroll and our existing funders we have agreed a comprehensive and robust three-year business plan.”

He added: “The faceless enterprise syndrome has been eliminated as the Brownhills’ management team now has ownership of the company.”

Meanwhile, Discover Leisure, an acquisitive AIM quoted caravan dealer, has seen its shares lose three quarters of their value over the past year. At the current price of 7p, the company is worth little more than £10m (US$20m).

That is less than half the level at which broker Panmure Gordon values Discover’s substantial land holdings. Much of this could be developed for housing.

The company’s market capitalisation is also half the £22m price the company paid for two other caravan retailers, Barrons and Mendip, last June. These deals were funded by a £20m placing at 22p a share.

Chairman David Morrow wants to develop 10 acres of land for housing but “can’t see it happening this year”. However, the company intends to talk to local authorities about planning applications. This could release cash for further acquisitions.

Although a placing at the current low share price is not attractive, Morrow said he wanted to exploit the current market environment to make further purchases, in line with Discover’s buy-and-build strategy in the sector.

“We review every opportunity that comes up. We currently have a £6m debt facility earmarked for acquisitions. At the moment land prices should be lower and help us exploit opportunities,” he said.