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UPDATE 3-Winnebago shares soar after its biggest deal ever

(Adds details, updates shares)

Oct 3 Motorhome maker Winnebago Industries Inc said on Monday it would buy privately held Grand Design Recreational Vehicle Co, a maker of towable recreational vehicles, in its biggest-ever deal, sending its shares soaring as much as 30 percent.

The cash-and-stock deal, valued at $500 million, will give Winnebago a bigger foothold in the growing towables market and create a company with revenue of about $1.4 billion.

Forest City, Iowa-based Winnebago, which had a market value of $634 million as of Friday, reported revenue of $977 million for the year ended Aug. 29, 2015.

About 37 percent of Winnebago's revenue will come from towables as a result of the deal compared with about 10 percent now, Chief Executive Michael Happe said on an analysts' call.

"This combination provides Winnebago with greater overall scale and a more balanced portfolio across its motorized and towables segments," Happe said.

Winnebago's deliveries of travel trailers jumped 74.2 percent in the third quarter, while fifth-wheel deliveries rose 13.2 percent for total towable deliveries of 1,205 units. Total motorized deliveries rose 12.4 percent to 2,917 units.

Grand Design generated revenue of $428 million in the 12-months ended August, for a compounded annual growth rate of more than 80 percent since 2013, Winnebago said.

Winnebago said shareholders of Middlebury, Indiana-based Grand Design, which has been in business for less than five years, would own about 14.5 percent of its shares after the close of the deal.

Grand Design was founded by three former executives of recreational vehicle maker Thor Industries Inc, Don Clark and Ron and Bill Fenech.

Winnebago, which also estimated quarterly earnings and revenue ahead of analyst estimates, will pay $395 million in cash and issue $105 million in new shares to Grand Design shareholders.

The company said the acquisition was expected to immediately add to profit margins and earnings per share after it closes.

Winnebago also forecast revenue of $263.3 million for the fourth quarter, a rise of 4.9 percent from a year earlier. Analysts, on average, had expected revenue of $249.16 million.

Adjusted earnings per share were estimated at 49 cents, beating the average estimate of 45 cents.

Winnebago will release its results on Oct. 13.

J.P. Morgan provided financing and advised Winnebago, while Lindquist & Vennum LLP acted as legal counsel. Baird acted as financial adviser to Grand Design, with Weil Gotshal & Manges LLP acting as legal adviser.

Winnebago shares were up about 25 percent at $29.30 in afternoon trading, close to a three-year high. Up to Friday's close, the stock had risen 18.4 percent this year. (Reporting by Shalom Aarons in Bengaluru; Editing by Martina D'Couto and Ted Kerr)

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