Polaris buying Pro Comp, 4 Wheel Parts parent Transamerican

MINNEAPOLIS (Oct. 12, 2016) — Off-road vehicle maker Polaris Industries Inc. has struck a deal to buy Transamerican Auto Parts Co. (TAP), a producer, wholesaler and retailer of accessories for the off-road market whose holdings include Pro Comp Tires and 4 Wheel Parts.

Minneapolis-based Polaris is offering $665 million for privately held Transamerican,  which reported sales of approximately $740 million for the year ended Sept. 30. The transaction is subject to regulatory approval and other customary closing conditions and is expected to close by year-end 2016, the companies said.

Following the closing, TAP will operate as a distinct business unit reporting to Steve Eastman, president of Polaris' parts, garments and accessories business. The company said it expects to fund the acquisition with borrowings under existing credit facilities.

“We are excited to add TAP's market leading multi-channel business, proprietary brands, proven management team and experienced employees to the Polaris portfolio,” Polaris Chairman and CEO Scott Wine said.

“This transaction is consistent with our long-term strategy, provides us an immediate leadership position in a growing market and allows us to accelerate Polaris' growth and profitability.”

Mr. Wine said TAP's products and services for customers in the off-road four-wheel-drive market correspond closely with Polaris' off-road vehicle business and combining the businesses' strengths will create significant value for the company's shareholders.

TAP's President and CEO Greg Adler said that, “over the past 55 years, our employees have built a company that prides itself on serving our customers with quality products at competitive prices.

“We see tremendous opportunity for further growth as we become an integral part of the Polaris organization,” he said. “Combining TAP with Polaris' aftermarket brand portfolio facilitates significant synergies, while Polaris' financial resources provide the backing we need to pursue a variety of growth prospects we have identified across the organization.”

Mr. Adler will continue as president and CEO of TAP, a company spokesman said.

Mr. Wine pointed out Polaris' resources will allow TAP to broaden its proprietary product lines and expand its retail and distribution footprint, where appropriate, and the combination opens the possibility of “cross-selling” both companies' extensive product offerings to a large combined installed customer base.

“Our similar cultures, centered on innovative brands and performance, make TAP a great addition to Polaris' expanding portfolio,” he said.

After adjusting for the $115 million estimated net present value of future tax benefits, the purchase price implies a multiple of approximately nine times TAP's pre-tax operating income (EBITDA) for the 12 months ended Sept. 30, Polaris said.

Compton, Calif.-based TAP sells and installs an extensive line of accessories for Jeep and truck enthusiasts, including products manufactured under its seven proprietary aftermarket brands:

• Pro Comp tires, wheels and suspension components;

• Rubicon Express lift kits and suspension components;

• SmittyBilt  Jeep and 4-wheeler accessories;

• Poison Spyder   “hard-core” parts for Jeeps, etc.;

• G2 axles and gears;

• LRG rims ; and

• Trail Master  lift kits, wheels, etc.

TAP considers itself the largest retailer and installer of off-road parts and components in North America through its 4 Wheel Parts retail and on-line networks, while also wholesaling to numerous independent accessory retailers/installers.

In announcing the deal, Polaris outlined a number of strategic and financial benefits, including:

• Complementary product lines: TAP's four-wheel-drive aftermarket products are highly complementary to Polaris off-road vehicle business.

• Expanded accessories portfolio and new product innovation capabilities: Opportunities exist to incorporate TAP's off-road product development expertise into creating innovative accessories and capabilities for Polaris Engineered product offerings;

• Significant growth potential: Polaris' financial strength creates opportunities to accelerate TAP's market penetration, and where appropriate, sell select Polaris aftermarket brands through TAP's retail outlets.

• Compelling financial benefits: The transaction is expected to be accretive to Polaris' earnings per share, excluding purchase accounting/acquisition costs, for the full year 2017. Polaris expects meaningful annual cost savings within three years following closing, primarily from efficiencies related to procurement, distribution, and expanded product offerings.

Polaris Industries is considered a leading player in the global powersports industry with 2015 sales of $4.7 billion.

Among its products/brands are:

• Ranger, RZR and General side-by-side off-road vehicles;

• Sportsman and Ace all-terrain off-road vehicles;

• Victory and Indian motorcycles;

• Slingshot moto-roadsters; and

• RMK, Indy, Switchback and Rush snowmobiles.

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To reach this reporter: [email protected]; 330-865-6145; Twitter: @reifenmensch