In what could be interpreted as a sign of the company’s financial strength, Polaris announced today that it has purchased all of Fuji Heavy Industries Limited’s 3.96 million shares of Polaris’ stock. The purchase price was $497.5 million.
Fuji has been a longtime engine supplier for Polaris, starting in the late 1960s and eventually becoming the only source until 1995 when Polaris began designing and manufacturing its own engines. Only one Fuji engine is used in Polaris’ 2014 snowmobile lineup. Here is an edited version of the release from Polaris:
MINNEAPOLIS (November 12, 2013) — Polaris Industries Inc. today announced that it has purchased all of Fuji Heavy Industries Ltd.’s 3.96 million shares of Polaris’ common stock for a purchase price of $497.5 million, thereby reducing its outstanding share count by approximately six percent. Polaris 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 a long successful engine supplier relationship dating back to 1968, when FHI began manufacturing Polaris’ exclusive “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 one-fourth of Polaris’ engines used in a number of models of snowmobiles and off-road vehicles. For model year 2014 and beyond, the company anticipates that the percentage of FHI-supplied engines will decline further as Polaris continues to significantly expand 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.”