MINNEAPOLIS, Minn. - Polaris Industries Inc. (NYSE: PII) announced that it has purchased all of Fuji Heavy Industries Ltd.’s (“FHI”) 3.96 million shares of Polaris’ common stock for a purchase price of $497.5 million, thereby reducing its outstanding share count by approximately 6 percent.
Polaris said it funded this purchase with a combination of cash on hand and $250 million of borrowings under the company’s revolving credit facility.
Polaris and FHI have an engine supplier relationship dating back to 1968, when FHI began manufacturing Polaris’ Star engine. FHI was the sole manufacturer of Polaris’ engines from 1968 to 1995, at which time Polaris gradually began to produce its own engines for select models.
For model year 2013, FHI supplied approximately 25 percent of Polaris’ engines used in a number of models of snowmobiles and off-road vehicles. For model year 2014 and beyond, Polaris forecasted that that the percentage of FHI-supplied engines will decline further as Polaris expands its own engine portfolio.
Scott Wine, Polaris chairman and CEO stated, “FHI has been a valued partner and long-term engine supplier since 1968 and a significant, loyal and stable shareholder since we first began trading as a public company in 1987. FHI approached us with the opportunity to repurchase their entire block of Polaris stock at a negotiated discount to the most recent average market price. Our decision to repurchase these shares demonstrates not only the confidence we have in the fundamentals of our business, but also our long-term growth prospects and the commitment we have to provide an above-average return to our shareholders.
"However, this opportunistic share repurchase transaction in no way signals a change in our strategic direction. We continue to believe there are abundant opportunities to further expand and diversify our businesses both organically and through acquisitions and we have ample borrowing capacity and strong cash flow to fund the anticipated growth of Polaris,” Wine added.
Polaris said it intends to issue $100 million of debt under an existing private placement Master Note Purchase Agreement before Dec. 31 to reduce the borrowings under the company’s revolving credit facility. After taking into consideration the funding and transaction costs and lower outstanding share count, this transaction is expected to have only a slightly positive impact on the company’s 2013 fourth quarter and full year earnings per share from continuing operations, Polaris noted. The company’s previously issued guidance for full year 2013 earnings per share from continuing operations, raised on Oct. 22, remains unchanged at $5.30 to $5.37 per diluted share.
On a pro forma basis, assuming this transaction had occurred on Jan. 1, 2013, the positive impact on expected full year 2013 earnings per share from continuing operations would have been approximately $0.25 per share, Polaris stated. The company’s share repurchase program authorization remains in place with approximately 1.6 million shares available for repurchase. The existing program does not have an expiration date.
Goldman, Sachs & Company acted as financial advisor to Polaris in this transaction.
Press release posted by Mary Slepicka