Polaris to sell a majority of its interest in KTM – January 22, 2007
January 22, 2007
Filed under Features
In an expected move, Polaris Industries Inc. agreed to sell back the bulk of its KTM shares to Cross Industries AG, KTM’s largest shareholder.
In 2005, Polaris purchased nearly 25 percent of KTM’s capital stock for about Euro 62.6 million. The two manufacturers entered an option agreement that allowed, under certain conditions, Polaris to purchase Cross’ majority interest in KTM Sportmotorcycles or Cross to repurchase Polaris’ 24.9 percent interest. In August, Cross officials said they did not want to sell their interest in KTM.
So Polaris agreed in December to sell about 1.38 million KTM shares to Cross for a price of Euro 58.5 million ($76.7 million). The Minnesota manufacturer, however, will keep a little less than 5 percent of the KTM stock.
Polaris said the proceeds from the KTM?stock sale will go toward repurchasing Polaris’ own shares under its current share repurchase authorization or to reduce the outstanding balance of the company’s revolving loan facility.
In connection with the agreement, Polaris and Cross also terminated a part of the 2005 agreement that eliminates Polaris’ option to purchase Cross’ shares of KTM.
“Our strategic partnership with KTM has been valuable for both parties since its inception, and we expect this to remain true going forward,” Tom Tiller, Polaris’ CEO, said in a prepared statement. “However, given KTM’s decision to remain independent, we agreed that it would be in the best interest of both companies to accelerate the share ownership decision before the fall of 2007 when the call options would have become exercisable. We respect KTM’s decision to remain independent and look forward to furthering our strategic relationship with them in the future.”
The sale of the KTM shares will be completed in two stages, with half of the shares to be sold on or before March 15 and the other half of the shares to be sold on or before June 15.