Analyst: Kolpin could lose ‘good part’ of its OEM business after Polaris purchase
The April 1 acquisition of Kolpin by Polaris could mean “that a good part of the roughly 25 percent of Kolpin’s business that is manufacturing accessories for other brands like Arctic Cat, Yamaha, and Kawasaki could go away,” according to a research note provided to Powersports Business by UBS Investment Research analyst Robin Farley.
Farley goes on to report that the rationale behind the latest Polaris brand is as follows:
“1) Kolpin has good brands and a distribution channel (incl. e-commerce channels) in which PII hasn’t been present. 2) There’s room to leverage scale in terms of operational synergies by using the same distribution center. 3) Kolpin has decent margins, similar to PII’s PG&A business. 4) There are opportunities for sourcing longer term, so that Kolpin could allow PII to manufacture some of the PG&A products that it currently gets from suppliers. 5) There are SG&A [selling, general & administrative] optimization opportunities. So a combination of factors, but the transaction will affect competitors’ PG&A as well as giving PII opportunity to bring more of its own PG&A in house.”
In addition, Farley writes that Polaris “sees more gaps to fill in the commercial space vs. recreational” and the Polaris “‘ABC’ strategy (anything but cars) still applies for any potential M&A. While still remaining conservative, Polaris does not rule out the possibility of taking leverage up slightly for a strategic acquisition.”