Polaris in Transamerican Auto Parts Sell-Off
Polaris Industries continues to roll-back loss-making or non-fit former CEO Stott Wine era acquisitions, with the announcement of a definitive agreement to sell its Transamerican Auto Parts (TAP) business to Colorado based Wheel Pros.
A designer, manufacturer and distributor of proprietary branded aftermarket vehicle enhancements for light trucks, SUVs, passenger cars and ATVs/UTVs, Wheel Pros is backed in the acquisition by Clearlake Capital Group, L.P. in partnership with management.
The transaction includes TAP's full portfolio of operations, including all brands, product lines, manufacturing operations, distribution facilities, more than 100 Four Wheel Parts retail locations, and more than 1,700 TAP employees.
"We have a clear vision to be the global leader in powersports," said Polaris CEO Mike Speetzen. "Our decision to divest TAP better positions us to capitalize on growing consumer interest and demand for our powersports offerings, while enabling Polaris to focus our time, people and resources on our core On-road, Off-road and Marine businesses, along with the parts, garments and accessories brands that support those customers.
"In addition, it supports our long-term financial targets and is expected to have a positive impact on EBITDA margin. TAP remains a leading omni-channel player in the Jeep and truck aftermarket space, and we appreciate the contributions the team has made to Polaris."
The news comes after January 2022 saw Polaris divest itself of two other Scott Wine era investments - GEM (the formerly GM owned Fargo N.D. based Global Electric Motorcars business) and factory and airport truck manufacturer Taylor Dunn.
Those businesses were sold to Waev Inc., a start-up created by a group of ex Polaris managers and based at Talyor Dunn's Anaheim, CA., offices. GEM was bought by Polaris in 2011 and made low-speed campus style electric vehicles; they bought Taylor Dunn and TAP in 2016.
Polaris recorded a $37m loss on the GEM/Taylor Dunn sale - the two businesses had combined sales of less than $100m. However, the TAP disposal is of a more significant scale and is expected to cost Polaris a net of tax impairment charge in the region of $140m.
The transaction is expected to close early in the third quarter, subject to customary closing conditions, and is estimated to drive $135m of additional cash inflows for Polaris in the second half of 2022. This includes the purchase price from the buyer and realization of cash tax benefits related to the sale, minus estimated transaction fees.
The sale price, net of cash, debt, and other costs is estimated at $50m. In 2021, Polaris' Aftermarket segment generated $930m in revenue, of which the Compton, CA. based TAP business accounted for nearly $760m - which must now leave a question mark over the long-term fit of the other brands included in its aftermarket segment; brands such as Kolpin, Pro Armor, Klim, 509 and Trail Tech.