Fridge deal portends peak camping - Reuters

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Revellers chat among their tents during the Glastonbury Festival in Somerset, Britain, June 25, 2015. REUTERS/Dylan Martinez

LONDON, Sept 17 (Reuters Breakingviews) - The camping-fridge market is in danger of overheating. Sweden’s Dometic (DOMETIC.ST), a $5 billion maker of motorhome gadgets, is shelling out a cool $677 million for Igloo, a Texas company that makes chillers fit for the great outdoors. The transaction offers few efficiency gains – after all, there’s minimal overlap between Igloo’s beer coolers and Dometic’s suite of caravanning accessories. A slowdown in the pandemic-driven camping boom is another risk.

Currently, private equity-owned Igloo is on fire. Revenue grew 24% in the last 12 months to $401 million. Yet sustaining that looks tough as the health crisis ebbs. Assume growth slows to 10% but Dometic keeps Igloo’s 10% EBITDA margin while cutting capex to zero. After $5 million of stated annual cost savings and Sweden’s 21% corporation tax, the deal offers only a 6% return on investment. In reality, depreciation charges will depress that further. Dometic thinks its cross-selling opportunities will bring in an extra $150 million of revenue. Its investors will be hoping that’s right. (By Ed Cropley)

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Editing by George Hay and Karen Kwok

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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