Under WSA’s IPO Scanner: Camping World Holdings Inc.

Camping World raised $251 million selling 11.4 million shares at $22 per share

The U.S. IPO market has so far witnessed 81 IPOs being priced, raising a total of $13.3 billion as of October 10th, 2016. In Q4 FY16, the U.S. market has witnessed 6 IPOs being priced, raising roughly $1.0 billion. As of October 10th, 2016, 104 IPOs have been filed, of which 3 have been filed in Q4 FY16. Of the total IPOs priced as of October 10th, 2016, Healthcare accounted for 35 deals or 43% of the total number of IPOs, raising proceeds of $2.8 billion, followed by Technology with 20% or 16 deals raising $2.5 billion.c1

c2The IPO market has averaged at about 10 deals per month since April 2016. The pace of IPO pricings is expected to increase in Q4 FY16, putting the year on track to close at 100 IPOs.

IPO activity is expected to be the highest in September and October 2016, followed by narrower windows of opportunity around the US presidential election and the holiday season.

Company overview

c3Camping World Holdings Inc., the largest U.S. recreational vehicle (RV) dealer, operates 120 retail locations in 36 states under the banners Camping World and Good Sam. The Lincolnshire, Illinois-based Camping World, founded in 1966, is headed by Chief Executive Marcus Lemonis, who co-owns Camping World with private equity firm Crestview Partners.

Camping World is the only provider of a comprehensive portfolio of services, protection plans, products and resources for RV enthusiasts. Approximately 9 million households in the U.S. own an RV, of which Camping World has approximately 3.3 million customers. Under its Good Sam brand, the Company offers a broad range of services such as extended vehicle service contracts and insurance protection plans, roadside assistance, membership clubs, and financing products. A majority of these programs are on a multi-year or annually renewable basis. Camping World also operates the Good Sam Club, which is the largest RV organization in the world, with approximately 1.7 million members as of June 30th, 2016.

c4Under its Camping World brand, the Company provides new and used RVs, repair parts, RV accessories and supplies, RV repair and maintenance services, protection plans, travel assistance plans, RV financing, and lifestyle products and services for new and existing RV owners. In 2015, the Camping World network generated approximately 3.5 million unique transactions.

In 2011, Camping World Good Sam combined with FreedomRoads, a successful RV dealership business founded in 2003, to form the largest provider of products and services for RVs in North America. Over the past five years, the Company’s customer-base has increased from 2.6 million as of December 31st, 2011 to about 3.3 million as of June 30th, 2016.

IPO details

On October 6th, 2016, Camping World announced the pricing of its IPO of 11.36 million shares of its Class A common stock at a public offering price of $22.00 per share, the middle of the expected range of $21 to $23. All of the shares of Class A common stock were offered by Camping World. The Company’s shares began trading on the New York Stock Exchange on October 7th, 2016, under the ticker symbol “CWH.” In addition, Camping World has granted the underwriters a 30-day option to purchase from Camping World up to an additional 1,704,545 shares of its Class A common stock at the initial public offering price, less the underwriting discount and commissions.

Shares of Camping World rose more than 3% on Friday, October 7th, 2016, their first day of trading. The stock traded at around $23, opening at $23.75, higher than its offer pricing of $22 a share. Selling 11.4 million shares, the Company raised $251 million in its maiden market debut. The IPO is expected to close on October 13th, 2016, subject to the satisfaction of customary closing conditions. CEO Lemonis is expected to maintain substantial control over the company through his ownership of ML Acquisition and ML R.V. Group, according to the IPO registration statement.

Goldman Sachs Group Inc. (NYSE: GS) and JPMorgan Chase & Co (NYSE: JPM) are serving as joint lead book-running managers and as representatives of the underwriters for the offering. BofA Merrill Lynch and Credit Suisse are also acting as joint book-running managers for the offering. Baird, KeyBanc Capital Markets, Wells Fargo Securities and Stephens Inc. are acting as co-managers for the offering.

Key market trends

Camping World’s IPO comes at an opportune time when a number of baby boomers, the biggest buyers of RVs, are retiring and selling their property to travel across the U.S. in RVs. According to research firm IBIS World, and as reported by Reuters, the retiring population of baby boomers has helped the truck, tractor and trailing industry grow 7.5% over the past five years, which is seen to be a huge positive for Camping World.

Moreover, millennials are also seen as a growing market, as they prefer to spend on experiences and adventure over material goods. However, with the Federal Reserve mulling an interest rate hike soon, the cost of financing vehicles for consumers may increase. To make RVs more affordable for millennials, Camping World has driven down the average price point on its RVs toward $15,000 to $20,000.c5

Rather than focus on RVs, which do not have as high a margin, Camping World is looking toward warranties, insurance, roadside assistance, parts and other services to grow revenue. The pipeline for the company’s continued growth includes acquisitions and new store openings, as well as the existing base of RV owners. Shares of other RV manufacturers Winnebago Industries Inc. (NYSE: WGO) and Thor Industries Inc. (NYSE: THO) are up about 40% and 50%, respectively, over the past year, a trend that Camping World is looking to emulate in the future months.

Post-IPO plans

Camping World generated about $3.3 billion in sales in 2015, up from $1.5 billion in 2011. It will use proceeds from the IPO to pay down its $695 million in long-term debt and for general corporate purposes.

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