Monomoy Capital Partners made an unsolicited, non-binding proposal for the RV parts maker, which is signed to merge with Patrick Industries. LCI's board still backs Patrick, and both companies vote on Nov. 18.
Three weeks before shareholders vote on its merger, LCI Industries has a cash alternative on the table, and a signed deal that has lost a quarter of its value.
LCI said early Wednesday that it received an unsolicited, non-binding proposal from Monomoy Capital Partners to acquire the company for $101 a share in cash. "LCI's existing merger agreement with Patrick remains in place, and the LCI Board of Directors continues to recommend in favor of the Patrick transaction," the company said, adding that the board will "carefully evaluate" the proposal and update shareholders "in due course." Shareholders were told to take no action.
Patrick Industries reaffirmed the merger three minutes later and said it "will monitor this development."
The three numbers
Under the all-stock agreement signed on June 30, LCI holders receive 1.2440 Patrick shares for each LCI share. At Patrick's close the day before signing, $93.18, that was worth about $115.92. At Patrick's early-afternoon price of about $70.52, it is worth about $87.72. Patrick has fallen about 24% since signing.
Monomoy's $101 sits between them: about 15% above the current value of the stock deal and about 13% below its value at signing, by our arithmetic. It is also less than 1% above LCI's own closing price the day before the merger was announced.
LCI shares rose about 8.3% to about $97.27, 3.7% below the cash price, on twice Tuesday's volume. The move began in the first trading after the 6 a.m. release. Patrick fell about 2%.
Why switching is not simple
The proposal is non-binding and no financing, conditions or timetable have been disclosed. The merger agreement carries a termination fee of $94.2 million, payable in specified circumstances including a change in the LCI board's recommendation, with a reciprocal fee from Patrick. On a cash offer valued at about $2.46 billion, the fee is roughly 3.8%. Both companies' special meetings are set for Nov. 18.
Monomoy knows the industry. It owns Thetford, which it bought in 2021, and acquired Astro Shapes in 2020.
Cash now or a share of the combination
The argument for the cash: it is worth more than the stock deal today, it removes exposure to Patrick's share price, and the board has acknowledged a duty to evaluate it. The market is pricing meaningful odds, having closed about two-thirds of the gap to $101 in one session.
The argument for staying the course: the proposal is not a binding offer, it is below what LCI holders were promised in June, the board still recommends Patrick, and cash would end LCI holders' 48% share of a combination that the companies say will produce more than $150 million of annual synergies.
What to watch
Any LCI board determination, a Monomoy financing disclosure or binding offer, a Patrick response beyond its reaffirmation, any postponement of the Nov. 18 meetings, and LCI's trading relative to $101.