REV Group announces strategic reorganization and special cash dividend

January 30, 2024

REV Group divests school bus business and exits transit bus manufacturing

On January 29, 2024, REV Group, Inc., a leading specialty vehicle brand manufacturer, announced a major strategic overhaul.

This included the sale of its school bus business, Collins Bus Corporation, to Forest River Bus, LLC.

The deal, finalized on January 26th, 2024, was valued at $303.0 million in cash, subject to standard adjustments.

Mark Skonieczny, President and CEO of REV Group, expressed his satisfaction with the transaction: “We have a long and successful history with Collins that dates back to the initial acquisition that started REV Group.

“We are pleased that the Collins team has a strategic new home with Forest River.

“I would like to thank the Collins team members for their contributions to REV Group and wish them continued success.”

Exiting transit bus manufacturing

The company also announced its exit from transit bus manufacturing by winding down operations at ElDorado National-California (ENC).

This process is expected to be largely complete by the end of fiscal year 2024, following the fulfillment of existing customer orders.

Skonieczny explained the rationale behind this decision: “Delays in the supply of critical components and the build out of infrastructure to support EV adoption, as well as the financial health of key suppliers, has created a competitive bidding environment for diesel and CNG buses that has made it difficult for ENC to compete profitably versus peers of greater scale.

“The decision to wind down operations was not made lightly; however, based on the options available to us, we believe this is the best path forward for our business.

“I would like to thank our ENC employees, dealers, and customers for their commitment to ENC over the years.”

Financial implications and shareholder returns

REV Group anticipates generating at least $250 million in net cash proceeds from these strategic actions.

A significant portion of this, approximately $180 million, will be returned to shareholders as a special cash dividend of $3.00 per share of common stock, payable on February 16th, 2024, to shareholders on record as of February 9th, 2024.

The remaining funds will be used to reduce debt under its ABL credit facility.

Organizational restructuring

The company is also undergoing an organizational restructuring.

It will now operate in two segments from the first quarter of fiscal 2024.

The new Specialty Vehicles segment will merge the Commercial and Fire & Emergency businesses, under the leadership of Mike Virnig, the current fire group president.

The Recreation segment will be renamed Recreational Vehicles, continuing under the leadership of Mike Lanciotti.

Updated fiscal 2024 guidance, including the impacts of these strategic actions, will be provided with its first quarter fiscal 2024 earnings release.

Skonieczny commented on the reorganization: “Today’s announcement creates a more focused operating structure that provides opportunities for growth, consistent cash generation, and improved margin performance.

“The net cash proceeds generated from these actions and strength of our balance sheet allow us to return cash to shareholders in the form of a special cash dividend while retaining ample liquidity and flexibility to continue to pursue our strategic agenda.”

FSJA Comment

REV Group’s strategic decisions mark a significant shift in their business model, reflecting a broader industry trend towards specialization and consolidation.

The sale of Collins Bus Corporation and the winding down of ENC signal a move away from sectors facing intense competition and challenging market conditions.

This transition not only streamlines REV Group’s operations but also potentially enhances shareholder value through the special dividend.

The reorganization into two focused segments could provide a clearer strategic direction and improve operational efficiency.

These actions demonstrate REV Group’s adaptability in a dynamic market and their commitment to maintaining financial health and shareholder returns.

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