National R.V. turns down offer.

Byline: Tim Christie The Register-Guard

National R.V. Holdings' board of directors on Monday emphatically rejected a bid by Country Coach founder Bob Lee and partners to buy the company, saying that the $92 million offer was woefully inadequate and severely undervalued the financially ailing company.

The board also took steps to fend off a takeover: It changed company bylaws, making it more difficult for shareholders to call board meetings and to remove board members. It alleged that Lee, himself a board member, may have improperly shared inside information with his takeover partners. And it put its would-be suitors on notice that they may have triggered a poison pill provision that could cripple the takeover effort.

The moves set the stage for what could be a protracted battle for control of the Perris, Calif., company, which owns Country Coach.

The board rejected the offer because it wasn't just low - " it was an incredibly discounted offer," CEO Brad Albrechtsen said Monday. "This offer was opportunistic."

Also, the board didn't think it wise to sell the company when the stock, and the company's fortunes, are down, he said. "The industry is in a soft spot, and when you're at the bottom - we hope we're at the bottom - that's not the time to sell."

Board members also were sending a signal that "they believe the company's plan for becoming profitable is a legitimate one that is showing results," and that they want time for the plan to work, he said.

Bryant Riley, the Los Angeles investment banker who is Lee's partner in the takeover bid, said Monday that he was surprised that the board rejected the offer out of hand and acted so aggressively to protect the company against a takeover.

"One thing that's fair to say: We're large shareholders and large shareholders don't go away," he said. "As shareholders, we're going to continue to do what we can to enhance shareholder value, whatever that means. All options are on the table."

Bryant's firm, B. Riley & Co., and an affiliate, SACC Partners, joined with Lee a week ago to launch a $92 million bid for National R.V. Together, the partners own about 15 percent of National R.V.'s stock, Riley said.

The company they formed, CC Acquisition Group, offered $6.25 per share in cash for the outstanding shares, plus the assumption of debt. The offer represented a 13 percent premium over the stock's closing price on Nov. 18, when the offer was made, and a 27 percent premium over the average closing price in the previous 30 trading days, the partners said.

The stock closed Monday at $6.20 per share, down 17 cents, or 2.67 percent.

National R.V. lost $12.8 million in the first nine months of 2005, including $5.9 million in the third quarter, and expects to lose money again in the fourth quarter. The stock has performed so poorly that the New York Stock Exchange has threatened to stop listing it.

The corporation's two divisions are going in opposite directions. The Country Coach division, which builds high-end diesel motor coaches and employs 1,600 workers in Junction City, has been making money and building RVs as fast as it can. The National R.V. division, which builds less-expensive gas RVs in Perris, has been losing money, and its factory is operating at just 40 percent capacity.

National R.V. executives say their plan to get the company back in the black is working, and that they expect the company to break even in the first quarter of 2006.

Albrechtsen suggested that changes could be in store as the RV industry appears to be in a period of consolidation. National R.V. has hired a financial adviser, the Spartan Group LLC, to help the company explore its options, he said.

Lee and Riley say they're concerned that National R.V. is steadily approaching insolvency and needs a drastic shake-up to turn things around. They want to downsize National R.V. and take the company private.

Riley wouldn't go into specifics about what changes CC Acquisition Group would make if it acquired the company, except to say it was imperative for the firm to get smaller.

"Country Coach is making money and National R.V. is losing money," he said. "You can't just sit there and wait for the company to correct itself. You need to scale the business properly."

Riley said the changes the National R.V. board made to the company bylaws, which were filed with the Securities and Exchange Commission on Monday, make it more difficult for shareholders to change the makeup of the board, call board meetings or change the direction of the company.

The National R.V. board alleged in its rejection of Lee and Riley's offer that Lee "may have breached his fiduciary duty to the company by disclosing confidential and proprietary information to Mr. Riley."

Albrechtsen said Monday that the board was "just asking at this point" if Lee shared inside information with Riley.

Lee could not be reached for comment Monday, but Riley said Lee did not provide inside information.

"I can definitively say Bob Lee has not given us information that was not public," Riley said. "He's given us opinions on how the company could be run better."

In another sign that the National R.V. board is playing hardball, board Chairman Doy Henley said CC Acquisition Group's ownership in the company may have exceeded 15 percent, a threshold that would allow the board to trigger a "poison pill" - a provision that would make a takeover unpalatable and maybe impossible.

"It doesn't mean we would choose to execute the pill" option, Albrechtsen said, "but we're asking for documentation so we can evaluate our options."

If any single shareholder or affiliated group of shareholders gains more than 15 percent ownership in National R.V., company rules allow the board to issue more stock to all other shareholders, diluting the ownership of the 15 percent group and reducing the value of its investment, Albrechtsen said.

National R.V. acquired Country Coach from Lee in 1996 for $9 million and the assumption of $10.1 million in debt.

The next National R.V. shareholder meeting is Dec. 9 in Perris. Shareholder equity in the company has declined 46 percent in four years, Riley said.