American Homestar Corporation Announces Strategic Manufacturing and Retail Acquisitions and a Possible Equity Offering.

HOUSTON--(BUSINESS WIRE)--May 28, 1998--American Homestar Corporation (Nasdaq/NM:HSTR) today announced that it has signed definitive agreements to acquire R-Anell Custom Homes, Inc. and its related manufacturing operations, Gold Medal Homes, Inc. and Gold Medal Homes of North Carolina, Inc. ("R-Anell"), and retailer First Value Homes, Inc.

Although specific terms of the acquisitions were not disclosed, the total consideration for the combined transactions is expected to be approximately $50 million in stock, cash, notes, and assumed debt, of which $18.5 million is common stock. Additional consideration of up to $12 million may be earned through achievement of certain performance criteria.

R-Anell produces distinctive lines of high-quality, upscale HUD-code manufactured homes and modular homes. The company markets its homes under the R-Anell and Gold Medal brand names through a network of 90 independent retailers located primarily in North Carolina, South Carolina, and Virginia. R-Anelloperates two modern plants in Denver, North Carolina, which produced revenues of over $57 million in calendar 1997. A new plant in Cherryville, North Carolina, was opened in October 1997 and is currently in its startup phase. The Cherryville facility is a brand new, state-of-the-art plant and one of the largest manufactured housing facilities in the country. The plant is located on a 120-acre site, contains over 250,000 square feet of floor space, houses two complete production assembly lines, and has the capacity to produce up to 100 floors per week. R-Anell is currently operating at an annual rate of $70 million in revenues. Subject to certain conditions, closing is scheduled for September 1, 1998, the first day of American Homestar's second quarter of fiscal 1999.

First Value Homes, Inc. is a retailer based in Gastonia, North Carolina, which specializes in selling modular homes and custom manufactured homes. In calendar 1997, First Value generated revenues of $24 million from its two, environmentally displayed modular home superstore locations. First Value has developed and implemented a unique marketing sales system which provides the customer with one-stop shopping for site selection, site construction and home installation, and mortgage financing. The company is a key customer of R-Anell, but also sells homes supplied by other manufacturers. Subject to certain conditions, closing is scheduled for June 30, 1998.

Commenting on the planned transactions, American Homestar President and Co-Chief Executive Officer Laurence A. Dawson, Jr. said, "These transactions represent two strategic initiatives for American Homestar. The R-Anell acquisition completes our manufacturing expansion strategy in the Southeast/Mid-Atlantic market area. We will now have five assembly lines in North Carolina, structured to produce 100% of the product needs, including low, medium and higher-priced manufactured homes and modular homes to support our independent retailer base and our growing network of Company stores and franchise operations. R- Anell has a management team led by Chairman and founder Rollan Jones and President Dennis Jones, an experienced work force, a loyal independent retailer base, and a clear vision for building the high-quality R-Anell and Gold Medal brands. We intend to provide the capital and support resources to help R-Anell realize its vision of leadership in the high-end modular/manufactured home market."

Chairman and Co-Chief Executive Officer Buck Teeter commented, "Our partnership with R-Anell and First Value represents a new strategic initiative in the modular home business. First Value represents our entry into modular home retailing, a new growth opportunity for American Homestar. The company, headed by President Ron Kruger, will operate as a separate subsidiary with the capital and mission to expand its base of operations."

American Homestar also announced today its plans to file a registration statement with the Securities and Exchange Commission for an offering of approximately 2.5 million shares of its common stock, subject to market conditions. All of the shares will be offered by the Company. Proceeds of the offering are expected to be used to fund the Company's acquisition strategy, planned expansion of the Company store network, national franchise program and manufacturing capacity, and for general corporate purposes. The proposed offering would be made only by means of a prospectus.

American Homestar is one of the leading vertically integrated manufactured housing companies. The Company currently operates 11 manufacturing plants, 86 Company-owned retail sales centers, and serves 40 retail franchisees and more than 300 independent retail locations in 28 states. The Company also provides retail financing through its finance affiliate, 21st Century Mortgage, and provides insurance and transportation services to its customers.

This press release contains certain forward-looking statements and information based on the beliefs of the Company's management as well as assumptions made by, and information currently available to, the Company's management. Words like "anticipate," believe," "estimate," "should," "expect," and similar expressions used in this press release are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties, and assumptions, including the risk factors described in the Company's most recently filed registration statement and Form 10-K. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual events or results may vary from those described herein as anticipated, expected, believed, or estimated.

    CONTACT:  American Homestar Corp., Houston
               Craig Reynolds, 281/334-9702