Power Play: Cat Buys Out Suzuki’s Share

In a show of strength – times two – Arctic Cat on Wednesday announced that it was buying outs its largest shareholder and doing so with cash, while still having a healthy cash reserve on hand.

The Thief River Falls, Minnesota-based snowmobile, ATV and UTV manufacturer (with corporate offices in Plymouth, Minnesta) bought out longtime engine supplier Suzuki’s one-third stake, paying $79.3 million for Suzuki’s 6.1 million shares of Arctic Cat stock. The move was accompanied by the elimination of the seat Suzuki held on Arctic Cat’s board of directors .

While this may sound like boring business stuff to some, it has much significance, historically and moving forward. Suzuki first purchased a block of Arctic Cat stock in the summer of 1988, paying $12.8 million for 640,000 shares, and the Japanese company has been supplying engines for Cat products since 1976. That original investment in Cat came in the wake of a buyout effort by Polaris.

Moving forward, this buyout of Suzuki continues a separation between the two companies that started when Cat started building its own ATV engines and is scheduled to accelerate when Cat takes over production of all of its snowmobile engines after the 2014 model year.

It also solidifies Arctic Cat. As one of the smaller powersports manufacturers, it seems there have always been rumors about Cat’s future and potential takeovers floating around – and Cat officials have always tried to fight back rumors of its alleged weakness by stressing its healthy cash reserves. With this move, Cat not only proved its stability by being able to buy up $79 million of its own stock, it also still has more than $60 million worth of cash still on hand, with no debt.

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Reaction to the move also played well on Wall Street. Cat’s stock jumped 26 percent on the day of the announcement, and it sits at $22.90 per share as of this writing after starting out Wednesday at $19, and $14.94 a share one year ago today.

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