Thoughts on the PATK/LCII All-Stock Merger

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Thoughts on the PATK/LCII All-Stock Merger

sted EBITDA of $1.0 billion, and FCF of

$508 million. PATK expects the deal with be accretive year 1 and noted $150 million of

run-rate savings within 3 years, comprised of 50% procurement/facilities and 50% G&A

savings. Given the nature of the industry, with many smaller supplier facilities, we think

there is a ceiling on facility consolidation opportunities.

We understand the appeal of the merger for PATK, as it'll gain more scale, which should

benefit PATK's leverage and pricing, while also providing diversification and accelerating

PATK's journey towards becoming a solutions' provider, rather than just a component

supplier. On a specific end-market basis, we think the biggest opportunities reside

in PATK's aftermarket business given LCII's expertise, and potential cross-selling and

an expanded portfolio in Marine. We note PATK's RV OEM customers have become

increasingly vocal about supplier margins, and we wonder if this merger will accelerate

OEM supply chain diversification initiatives, particularly THO (OP, $78.92) with its

Airxcel business and Forest River's relationship with Terran. However, we think price,

innovation, and capacity will still be key deciding factors for the OEMs. We're less

concerned in the near-term, particularly after management alluded to working with

customers on pricing (via more volume) and an expanded product lineup to address

affordability; we also expect the new entity will follow PATK's go-to-market pricing

strategy. Long-term PATK expects more volume and potential incremental synergies will

enable shared cost savings to further address affordability.

The deal is expected to close sometime in 1H27 and will likely face some regulatory