National RV Holdings Inc. is losing money daily and is headed for insolvency, according to a group of investors that has offered to buy the Perris, Calif.-based motorhome maker.
The Press-Enterprise reported that the group stated in Securities and Exchange Commission (SEC) documents the only way to save the company is to drastically downsize operations and take it private.
The filings reveal the reasoning behind Los Angeles-based CC Acquisition Group Inc.’s $92 million bid for National RV Holdings, parent to Perris-based National RV Inc. and Country Coach Inc., Junction City, Ore.
“Privatizing (National RV Holdings) will allow us to take decisive and, if need be, drastic steps to return the company to profitability without having to answer to public scrutiny during the potentially lengthy process,” the document reads.
The group asked for an answer from the company by Dec. 31.
National RV Holdings President and CEO Brad Albrechtsen said the board of directors will consider the offer, as it has done with previous bids.
“It was an extremely, extremely low offer,” he said. “I think it is to get the stock into play and get some attention, and force management to consider alternatives.”
Shares of National RV Holdings jumped 74 cents Tuesday, or nearly 13%, to $6.45.
Led by RV industry pioneer and company board member Robert B. Lee, the group includes Bryant Riley, the head of Los Angeles investment house B. Riley & Co. Together, they own 14.88% of the company’s stock.
“We had a couple of good years and then things went south in Perris,” said Lee, who founded Country Coach in 1973 and sold it to National RV in 1996. It is now a subsidiary of National RV Holdings.
“They have been using Country Coach as a cash cow to keep them afloat,” he added. “I’m afraid they will keep doing that until they put them both in the ditch.”
CC Acquisition Group has offered to buy outstanding shares of National RV Holdings at $6.25 each – a 13% premium over its Nov. 18 closing price – and assume the company’s debt. The acquisition would give current investors a way to cash out, Lee said.
National RV Holdings has lost money for three consecutive years – a total of $37.6 million – and will likely record its fourth-straight loss this year.
According to the Press-Enterprise, the company blamed the most recent quarterly loss of $5.9 million on poor sales of lower-priced gas and diesel models, which are made in Perris. Sales of high-end RVs made by Country Coach have been doing well, he said at the time.
“He’s had control for four years and hasn’t made money,” Lee said about Albrechtsen, who has been president since 2001. “He is a super guy. It’s just that his management skills are somewhat less than what we need down there.”
Albrechtsen defended his management and pointed out that the company’s operating profits have improved dramatically since he took over.
“[Lee] disagrees with management on who can best run the company, and he is entitled to that opinion and to make the offer,” Albrechtsen said.
Wayne Mertes, who founded National RV in 1964 and retired two years ago, suggested that a buyout may be the company’s only hope.
“People generally buy a company based on the strength of its product and the strength of management,” he said. “But this company doesn’t have either one. On the other hand, there is value in the name, product identification and the real estate.”
Lee says he would do whatever it takes to turn the company around.
“Very few people in this industry can do what I can do,” said Lee, who also owns Desert Shores, an upscale motor coach resort in Indio and lives there part of the year. “I have always made money, and money is what this is all about.”