POLARIS INDUSTRIES INC.
AND KTM ANNOUNCE STRATEGIC PARTNERSHIP
Polaris to purchase 24-percent
interest in KTM
Companies to cooperate on product,
technology, manufacturing and distribution projects
Potential for relationship expansion
in 2007
MINNEAPOLIS, July 19, 2005
– Polaris Industries Inc. (NYSE/PSE:PII) announced today
that it will purchase a 24-percent interest in Austrian
motorcycle manufacturer KTM Power Sports AG, formerly known
as Cross Holding AG, and partner with KTM on several important
strategic projects. The goal of the partnership is to strengthen
the competitive position of both companies and provide tangible
benefits to customers, dealers, suppliers and shareholders.
During the first phase of the partnership, each company
will continue to be run separately, but will work together
on several specific cooperative projects involving new product
development, engine technology sharing, distribution, manufacturing,
and purchasing. This initial phase of the partnership will
last approximately two years and, in addition to the cooperative
projects, will involve the following:
Polaris will purchase a 24-percent
stake in KTM Power Sports AG from an institutional investor
for 66.6 million Euros or approximately $80 million
funded from Polaris’ existing bank line of credit arrangement.
This represents approximately a 12 percent discount
to the market value of the shares purchased reflecting
the size of the block of shares purchased and the fact
that the shares are thinly traded. KTM Power Sports
AG (formerly known as Cross Holding AG, which is publicly
traded on the Vienna Stock Exchange under the symbol
CRO), owns and controls KTM Sportmotorcycle AG, a leading
European manufacturer of motorcycles with fiscal year
2004 revenue of over 400 million Euros. Over its history,
KTM has earned a reputation for providing class-leading,
ready-to-race, off-road motorcycles, and recently has
entered the on-road motorcycle segment. This transaction,
subject to customary closing conditions and regulatory
approval, is expected to close during the third quarter
of 2005. The actual number of shares purchased and the
purchase price are subject to reduction depending upon
the number of shares of KTM Power Sports AG outstanding
on the closing date.
Polaris CEO Tom Tiller is expected
to be named to the KTM Supervisory Board after the closing
date of the transaction.
KTM CEO Stefan Pierer is expected
to be named to the Polaris Board of Directors after
the closing date of the transaction.
The investment in KTM Power Sports
AG is expected to be neutral to calendar year 2005 Polaris
consolidated earnings per share and somewhat accretive for
the full year 2006. There are no changes in employment anticipated
at either company as a result of this announcement.
Additionally, Polaris and KTM Power Sports’ largest shareholder,
Cross Industries AG (“Cross”), have entered into option
agreements which, under certain conditions in 2007, either
Cross may purchase Polaris’ interest in KTM Power Sports
AG or, alternatively, Polaris may become the majority shareholder
of KTM Power Sports AG. In the latter case, the majority
of the purchase price to Cross will be settled in Polaris
shares and Cross will become a significant shareholder in
the combined Polaris/KTM organization. Cross’ principal
shareholders are KTM CEO Stefan Pierer and KTM CFO Rudolf
Knünz. The exercise price under both option arrangements
are based on market-based, predetermined pricing formulas
to be derived from operating results of both companies in
2007.
“I believe this partnership will provide substantial benefits
to both Polaris and KTM, and both company’s dealers, employees,
suppliers and shareholders for many years to come,” said
Tiller. “We have long admired the success of KTM, and are
excited about working together to strengthen both companies.
Polaris can benefit from KTM’s substantial experience in
motorcycles, an outstanding brand, leading technology, and
a solid manufacturing presence and dealer network in Europe.
Moreover, this relationship complements nearly every aspect
of Polaris’ five-year strategic vision, which is a roadmap
to make Polaris the most dominant brand in the powersports
industry. Further, we believe the two-step approach we have
outlined significantly lessens the cultural and execution
risk associated with a partnership of this magnitude.”
“In essence, this partnership combines the substantial strength,
passion, and success of two industry leaders with very similar,
successful 50-year histories, but who do not compete directly
today. It is a very natural fit for both of us,” added Tiller.
Mr. Pierer commented, “Polaris and KTM complement each other
very well, and we are very excited about our new relationship.
By joining forces, we believe we can strengthen KTM’s presence
in North America, reduce our production costs, spread our
development costs over a larger base, and substantially
accelerate our entry into the ATV business. We also look
forward to sharing both chassis and engine technology with
Polaris. The KTM and Polaris teams should work well together
– both companies are driven by innovation, passion, and
demand success.”
About Polaris Information about the complete line of Polaris products,
apparel and vehicle accessories is available from authorized
Polaris dealers or from the Polaris homepage at www.polarisindustries.com.
With annual 2004 sales of $1.8 billion, Polaris designs,
engineers, manufactures and markets snowmobiles, all-terrain
vehicles (ATVs), Victory motorcycles and the Polaris RANGER
for recreational and utility use.
Polaris is the recognized leader in the snowmobile industry;
and one of the largest manufacturers of ATVs in the world.
Victory motorcycles, established in 1998 and representing
the first all-new American-made motorcycle from a major
company in nearly 60 years, are rapidly making impressive
in-roads into the motorcycle cruiser marketplace. Polaris
also enhances the riding experience with a complete line
of Pure Polaris apparel, accessories and parts, available
at Polaris dealerships.
Polaris Industries Inc. trades on the New York Stock Exchange
and Pacific Stock Exchange under the symbol “PII,” and the
Company is included in the S&P Small-Cap 600 stock price
index.
About KTM KTM Sportmotorcycle AG designs, engineers, manufacturers
and markets off-road and on-road motorcycles and related
parts, garments and accessories with annual sales of 402
million Euros in 2004. The product portfolio consists of
over 23 different off-road and on-road motorcycles ranging
in engine size from 50cc to 990cc.
KTM is best known for it racing heritage. KTM has won 106
World Championship Titles, 10 in 2004 alone. The Company
employs approximately 1,500 employees and assembles its
engines and motorcycles in Mattighofen, Austria. Additionally,
the Company manufactures exhaust systems, frames, shocks
and spoke wheels. KTM sells it motorcycles through a network
of over 1400 independent dealers and approximately 50 distributors
worldwide with Europe being its strongest market. Information
about the complete line of KTM products, apparel and vehicle
accessories is available from authorized KTM dealers or
from the KTM homepage at www.ktm.com.
KTM Power Sports AG, formerly known as Cross Holding AG,
is traded on the Vienna stock exchange under the symbol
CRO, which is in the process of being changed to the symbol
KTM. Additional information on KTM Power Sports AG can be
found at www.cross-ag.com.,
which is in the process of being changed to www.ktm.com/investor
relations.
Except for historical information contained herein, certain
matters set forth in this news release are forward-looking
statements that involve certain risks and uncertainties
that could cause actual results to differ materially from
those forward-looking statements. Potential risks and uncertainties
include such factors as product offerings, promotional activities
and pricing strategies by competitors; warranty expenses;
foreign currency exchange rate fluctuations; benefits from
the KTM relationship; environmental and product safety regulatory
activity; effects of weather; higher commodity costs; uninsured
product liability claims; and overall economic conditions,
including inflation and consumer confidence and spending.
Investors are also directed to consider other risks and
uncertainties discussed in documents filed by the company
with the Securities and Exchange Commission.
