MINNEAPOLIS _ Long-struggling Minneapolis-based Arctic Cat is being purchased by Textron Inc. for $247 million in cash, a consolidation coming at a time when sales of all-terrain vehicles and snowmobiles have been under pressure, company officials announced Wednesday.
The sale to Rhode Island-based Textron represents a bold solution for a manufacturer that has long tried but failed to turn around, consistently make a profit or greatly excite consumers with new model introductions.
Arctic Cat was founded in northern Minnesota in 1960 and employs about 1,600 people, mostly in a Thief River Falls, Minn., factory, an engine manufacturing plant in St. Cloud and at the company's new headquarters in the Minneapolis. Arctic Cat just moved into the headquarters in August, after the building's owner invested $27 million in renovations for Arctic Cat.
In announcing the sale to Textron, company officials said Arctic Cat's Minnesota facilities are largely expected to stay intact following the close of the deal, which could finalize later this year. That news is a relief to state and city officials who worried about the prospect of losing yet another Minnesota-based corporate headquarters.
Textron, with $13 billion in revenue, 35,000 employees and its own share of troubles meeting Wall Street's profit expectations, will pay $18.50 for each share of Arctic Cat, a 41 percent premium above the company's $13.13 stock price from earlier this week. Arctic Cat shares jumped 41 percent to $18.53 in early trading Wednesday.
"Arctic Cat's board believes that Textron's offer delivers compelling and immediate value to our shareholders," Arctic Cat CEO Christopher Metz said in a statement. "This transaction presents increased opportunities for the business to leverage our combined scale, accelerate growth and enhance product innovation in ways that will benefit our customers, dealers and employees."
It is unclear if Metz intends to stay with Arctic Cat after the deal closes. When asked, his spokeswoman would only say: "We are not able to provide more information at this time."
Metz, a former Black and Decker executive and turnaround expert in the private equity realm, joined Arctic Cat as CEO in December 2014 after years of management turbulence and poor financial performance. In two years, Metz focused aggressively on reducing dealer inventory, boosting promotions, new products and sponsoring more events in the sports racing world. Now he's steered the company toward new ownership and what he says will be a future filled with more opportunities for employees.
"We are proud of the progress our team has made to lay the foundation for Textron to continue taking this company forward," Metz said in a statement. "Textron plans to build on Arctic Cat's strong brand and history of innovation. We expect many Arctic Cat employees to benefit from expanded career opportunities as part of a larger, more diversified company."
Textron, which is better known for making golf carts and utility vehicles, is expected to make Arctic Cat part of its "specialized vehicles" business and maintain its current manufacturing, distribution and operational facilities, "with a focus on growing the business," Textron officials said in a statement about the deal.
As of last spring, Arctic Cat employed roughly 1,200 hourly and production personnel and 370 salaried employees.
Along with its Minnesota facilities, Arctic Cat owns or leases facilities in Bucyrus, Ohio; Island Park, Rigby and Idaho Falls, Idaho; and Winnipeg and St. Johann, Austria.
Arctic Cat products are made in Minnesota but sold through a network of independent dealers across the United States, Canada, Europe and through distributors in other parts of the world.
Dealers reached Wednesday said the sale could be a very good thing for them.
"I personally think that is the best thing for Arctic Cat," said Clark Peterson, a manager of Cities Edge Motorsports in Shakopee, Minn. "Anybody who is solidly financially backed would be a better thing for the dealer. Then Arctic Cat can keep being competitive with the Japanese and other original equipment manufacturers. And they can invest more in their dealers, with long term projections in mind and not so short term."
Other dealers wondered if Textron will adopt a different sales strategy. They complained that Arctic Cat sometimes requires dealers to carry too much inventory, and sometimes permits competing dealerships to operate too closely to one another.
Arctic Cat reported in November that it suffered steep sales and profit declines amid a weakening power-sports market.
Sales sunk 22 percent to $165 million for the fiscal second-quarter that ended Sept. 30. The company lost $12.8 million, or 98 cents a share, a reversal from a profit of $11 million in the same period a year ago. The results included a recent 1.4 million charge from a product liability settlement.
Combined, Arctic Cat and Textron will offer many types of recreational, utility and specialized vehicles. By adding Arctic Cat to its lineup, Textron said it intends to more aggressively invest in product development, dealer networks, marketing and customer service.
The completion of the acquisition is subject to customary conditions and regulatory approvals.
Arctic Cat Chief Financial Officer Christopher Eperjesy said Wednesday that the company is now in a regulatory "quiet period" and not commenting beyond the sales announcement and filings with the federal Securities and Exchange Commission.
Founded in 1960 and originally based in Thief River Falls, Arctic Cat is best known for snowmobiles but also makes ATVs and side-by-side utility vehicles. Snowmobile pioneer Edgar Hetteen started the company after departing another Minnesota snowmobile manufacturer that he helped start, Polaris.
Arctic Cat moved its headquarters from Thief River Falls to the Twin Cities suburb of Plymouth in 2007 and then to Minneapolis in August 2016.
Arctic Cat is not the only one trying to remake itself. Textron released fourth quarter sales and earnings results Wednesday that fell during the quarter, and which missed Wall Street expectations. Textron announced that it will take an $8 million pretax restructuring charge.
Textron Specialized Vehicles produces golf carts, utility and personal transportation vehicles, professional turf-care equipment and ground support equipment. Its brands include the more recognizable E-Z-GO and Cushman labels. Its vehicles are found from golf courses to factories, airports to planned communities, theme parks to hunting preserves.
Textron is best known for aviation brands such as Bell Helicopter, Cessna and Beechcraft.
