November 29, 2010 / 10:40 PM / 7 years ago

UPDATE 1-Cavo Industries to buy assets of Palm Harbor Homes

* Cavco, Third Avenue Value to buy Palm Harbor Homes

* Deal subject to higher bids and court approval

WILMINGTON, Del., Nov 29 (Reuters) - Cavco Industries Inc (CVCO.O), a builder of manufactured homes, said on Monday it would lead a deal to acquire the business of ailing rival Palm Harbor Homes Inc PHHM.O.

As part of the agreement, Dallas-based Palm Harbor filed for bankruptcy in Delaware. Cavco and Third Avenue Value Fund will provide up to $55 million of debtor-in-possession financing to fund Palm Harbor’s Chapter 11 proceedings.

Cavco and Third Avenue formed a joint venture, which will be part of Cavco unit Fleetwood Homes Inc, that will pay $57.5 million for the assets and some liabilities of Palm Harbor.

The Cavco and Third Avenue proposed purchase is subject to court approval and higher bids.

Palm Harbor builds, sells, finances and insures manufactured homes.

Phoenix-based Cavco has been building manufactured model homes and cabins for more than 40 years.

Palm Harbor’s insurance and finance subsidiaries are not included in the bankruptcy, but the shares of these companies are included in the assets to be acquired by Fleetwood.

The company listed assets of $321 million and debts of $280 million. About a third of the company’s equity is owned by Capital Southwest Corp (CSWC.O).

Sally Posey, wife of the company’s deceased founder Lee Posey, and the Sally Posey Trust own roughly 20 percent.

Nasdaq-traded shares of Cavco ended Monday up 1 percent at 34.53 while those of Palm Harbor rose 12.5 cents to 27 cents.

The case is In re: Palm Harbor Homes Inc, U.S. Bankruptcy Court, District of Delaware, No. 10-13850. (Reporting by Tom Hals; additional reporting by Santosh Nadgir in Bangalore; Editing by Tim Dobbyn)

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