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HomeFeatures48 Hours Later: Thoughts on Textron's Purchase of Arctic Cat

48 Hours Later: Thoughts on Textron’s Purchase of Arctic Cat

Arctic Cat Textron ArcticInsider.com

What you’re about to read is just my humble opinion.

 

It’s been 48 hours since we learned the shocking news that Textron has agreed to buy Arctic Cat for $247 million (plus existing debt), due to occur in the next couple of months provided that the shareholders approve the offer.

I say this was shocking news because the majority of Arctic Cat people – which includes employees, dealers and customers – weren’t expecting it. Selling the company wasn’t on the radar for many people.

Some people were not shocked at the news. They say that the writing has been on the wall, or more accurately the financial balance sheet: in the past 24 months, Arctic Cat has gone from a company with approximately $140 Million in the bank and essentially zero debt, to a company with approximately $10 Million in the bank and approximately $75 million in debt as of last fiscal quarter. I’m not a numbers guy, but I’m seeing an approximately $200 million swing from black to red.

There has been speculation for months that Arctic Cat was for sale, and that the only real uncertainty was who the buyer might be.

Yamaha? Harley-Davidson? Private equity?

Upon the announcement that Textron was buying, the many conversations with Arctic Cat people showed remarkable consistency.  There is unanimous sigh and strong optimism about the brand’s future.

The people expressing this optimism range from high-level people within Arctic Cat, to dealers and more.

The reasons for optimism make perfect sense:

1. Arctic Cat will be purchased by a $13 billion dollar company. By comparison, Yamaha Motor Corp. is a $7.4 billion company; Polaris a $5.5 billion dollar company; Harley-Davidson a $10.6 billion dollar company; and BRP a $3 billion company.

With the financial backbone and diversification of Textron to support it, Arctic Cat could be far less vulnerable to the tumult of poor winters, excessive inventory and the like.

Moreover, the buying power afforded by a company the size of Textron (who produces oodles of E-Z-GO golf carts, for example) has the potential to lower prices from common vendors who supply things like batteries, clutches, headlights, tires, wheels, wiring harnesses, seat foam, plastic and the like. Lower pricing on supplies can enable lower pricing on retail units, higher margins, or both.

2. With the financial strength of a mother ship to support it, Arctic Cat could invest in an aspect of its business that would have been too expensive, or perhaps risky, when it stood entirely on its own. Ideas that occur to me are a full build-out of its state-of-the-art engine facility in St. Cloud, Minn.; a high performance 4-stroke engine program; a snowmobile that is sized and priced as the modern day equivalent to the 1970s Jag; a new category of wheeled vehicle; and full-scale dealer development and expansion.

3. Textron has a long history of acquiring companies, then making them financially strong, rather than gutting them of assets and discarding the rubble. And this is consistent with the message that both Arctic Cat and Textron expressed during the announcement. The exact words are:

“Arctic Cat will become part of Textron’s Specialized Vehicles business, maintaining its iconic Arctic Cat brand, as well as its current manufacturing, distribution and operational facilities, with a focus on growing the business.

“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.”

I’m very much encouraged by the fact that Textron’s Bad Boy UTV line is produced domestically in the U.S. Same for E-Z-Go and Jacobsen (including Dixie Chopper) vehicles.  

 

Of course, there are some reasons to be guarded. And I can understand being worried. Textron has said very little at this point. The deal hasn’t yet happened. And we don’t know what decisions will be made once new leadership evaluates Arctic Cat from the inside, rather than from the outside as they’ve done up to this point.

It remains to be seen what exactly Arctic Cat looks like as a company 6 months, one year and five years from now. There is tremendous uncertainty for many people right now, about whether they will be part of the new Arctic Cat going forward. I’m one of those people.

I have no uncertainty or worry about Arctic Cat dealers and customers. The conversations I’ve had with Arctic Cat dealers who already sell Textron products tell a very positive story. Under Textron ownership, I see an Arctic Cat that is less likely to force product into dealership inventory, for the simple reason that it will have the financial backbone to withstand the forces that compel most powersports manufacturers into this self-destructive practice.

And for us loyal customers, I see a new horizon with an even greater emphasis on quality that has come to define Arctic Cat in recent years. Arctic Cat could have delivered its C-TEC2 8000 engine a year ago, but it waited until it could fully test a new supplier for a critical component. The Arctic Cat of five or ten years ago might not have shown such restraint. I see an continuation and, perhaps, an amplification of that mindset with the new ownership.

I know that many of us desire greater and more frequent improvements in technology on the machines we buy, particularly snowmobiles. We point to the long history of Arctic Cat machines being the biggest and fastest, with the most aggressive evolution.

My sincerest hope is that the new Arctic Cat will retain that legacy, but only if it means no compromise in quality. How it tackles these kinds of decisions will ultimately define its future.

I’m optimistic, and hope to be a part of it.

Final thought for now: Arctic Cat has been a standalone company for 55 years, with no mother ship to support it. That’s an astounding run. There’s a part of me that’s saddened to see this run come to an end. But there’s a bigger part of me that hopeful for what the future will bring. I have such tremendous respect for, and faith in, the people at Arctic Cat whose passion runs deep. Their talent and dedication are the lifeblood of the brand. Given the right tools and resources, they will lead us into another half-century that’s even better than the first.

Thanks for reading.

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19 COMMENTS

  1. As a die hard Cat fan and rider/racer, I hope this works out for everyone with better products that we all enjoy. In terms of R&D, consumer/race sled development/program, ATV/SxS/R&D/sales, etc and even the Cat clothing line, all we can hope for is for this great company only to get better.

    But if Cat starts to disappear, I will jump ship to another brand. But I pray that will never happen.

  2. Lot’s of heart felt common sense, the facts are so clear now. Get big or get run over— The brand has to live on. Its amazing what they have accomplished !
    Thank you

  3. Love the brand and that is all it is. But at the end of the day I want what makes me most happy. Textron needs to trail ride the other brands and see what they think.? And move forward from there

  4. Arctic Cat! it is so much more than just a name of a company to be bought or sold. It’s about all the people and employees who care so much about this company and what it has meant to all of us throughout the years. It’s about a freshman in high school in the early 70’s walking up to the local gas station which was also a Cat dealer and just sitting on the machine and dreaming that someday I would own a Cat! It’s about a young man bringing home a 1974 el tigre 295 and the smile on his face. It’s about racing in the Winnipeg 500 on cross country cats (thanks Norm & Al for your sponsorship). It’s about working at the Cat dealership putting together brand new Cats out of their crates. It’s about the heartbreak when Arctic Enterprises went bankrupt in the early 80’s. It’s about the joy seeing the comeback in 1984! It’s about seeing the strong comeback in the 90’s. ZR’s come to mind. It’s about going up to Thief River Falls for a visit through the factory and seeing all the great people working to build Arctic Cats. It’s about “Team Arctic” and all the people who made this brand what it is! It’s about this great website dedicated to all things Cat and the loyalty this brand has! I truly hope the sale to Textron works out great for all of us loyal Cat fans out there and I hope the fine folks at Textron know just how great the people of “Team Arctic” are. Thanks John for all hard work you put in to keep us all informed.

  5. I am AC’s biggest critic… but that’s only because I bleed green and always want them to be the best. I hope the passion and tradition lives on and is taken to new heights by Textron. I write this at 3:40 am after just parking my 2016 Arctic Cat El Tigre’ for the night after a flawless 100 mile ride. Could it be faster, better, sexier… always! But I enjoyed every second on it and it performed flawlessly the entire night. Thank you AC!

  6. We need more dealers to get the brand out there. Stop shoving product down their throats. I used to have a dealer right here in town and 4 others within a 30-40 mile radius. Now I have to travel 2 to 3 hours to see and touch the machines, clothing and accessories. Customers, like myself, need and want convenience. I grew up like “Steve from White Bear Lake”. Walking down to the local dealer and sitting on and dreaming of owning one of these great machines and buying the matching riding equipment. Then the day happened when my dad bought a 1973 250 El Tigre. I was just a wee little kid with a paper route. I had saved and saved prior to this for this day to buy the matching riding gear. I ran down to the dealer and purchased the matching helmet, boots and snow suit. The dealer knew I had been saving for this. He would always smile, as would I, when I would come in everyday and dream. We all knew each other back then. I miss those days and want them back even at my age of 58 now. I have always and will continue to own Arctic Cats. To this day I wear only Arctic Cat clothing. My wife calls it an obsession. I call it a passion.

    Textron keep making Arctic Cats and the passion I have for them.

  7. I like the suggestion about a new smaller sled. Car companies will sometimes take a second look at past product for inspiration. How about an updated 199Os zr440 crossed with a 1970 Puma single cylinder EXT, using a high output 4Stroke single like the DVX 400 atv had? Get the price down to four grand. And use a radiator for low snow cooling. 4 Stroke to make meeting epa regs easier. Keep,it small, like the old Puma or trail Z.

  8. My kneejerk reaction was certainly negative about this whole thing. Arctic Cat has been a part of my life since I was 2 and I consider it almost a part of the family. Much like all the great employees of AC and dealers I have met over the years. AC fans are about the most loyal out there, right up there with Harley Davidson. We have gone through the down times and certainly gotten beat plenty by friends on competitive machines, but that didn’t change my feeling for the company or the product because like them, I had the passion for the sport and I knew they would come out with something better, which they always did.
    The part I fear for isn’t necessarily the brand itself, but the passion FOR the brand. It is much easier to root for the underdog, but now it might be harder. I hope they keep their passion and what has gotten them here. If it changes to a Corporate structure like I am all too familiar with and solely cares about bottom line and less about the brand itself, it will be sad.
    I am intrigued by the opportunities this may give AC in the years ahead. Military contracts? More exposure overseas?
    The next thing I worry about is Production of the product. I don’t worry about the engine facility in St Cloud, but I do worry about what gets produced in TRF in the long term. It would certainly make sense to centralize manufacturing of the SxS products (perhaps even ATV) now that there is the sister product Bad Boy in the mix. This could be both positive AND negative.
    It will be interesting to see how AC proceeds in the coming weeks with product launches. People have been desperately waiting for the next great Wildcat X and the 2018 sled announcements.

  9. John any talk or insight what this may mean for the racing programs, Just thinking.
    Thanks for yet another great read, somhow you made it feel somwhat better.

  10. Some random thoughts on Textron’s purchase of Arctic Cat:

    What AC brings to the party:
    1. An established ATV and snowmobile brand and products.
    – Textron SV’s Bad Boy is a lesser known ATV brand and doesn’t have a snowmobile line.
    2. Wide distribution in the US, Canada and Europe.
    – Textron’s Bad Boy appears to have very limited distribution outside of the US.
    3. Engineering know-how in snowmobiles and also ATVs.
    – Textron is buying valuable knowledge in both product lines.

    What Textron SV brings to the party:
    1. Financial resources.
    2. US government/ military connections.
    3. Engine technology.
    4. An agreement to market ATVs under the New Holland brand.

    Why Textron wants AC:
    1. The well-known brand, distribution and ATV and snowmobile product lines.
    2. AC’s ATV business combined with Textron’s increases production and distribution scale and will likely be number 4 in the world, up from number 5.
    – The combined business, which will be about $1.6 billion in total sales, up from $1 billion, will be around 35% AC.
    3. The combined Textron SV division will look a lot like Polaris, minus the motorcycles.

  11. from the email you probably guessed I was a Yamaha customer , my first cat was an 1980 Eltigre 6000. I have 3 Cats, and XF , F. and M8000 now and hope the brand is not gutted and the new owners go cheap and farm out to the Chinese. the at brand has had some ups and downs but has remained tru to their customers unlike the others, Heres to hoping that the best years are not behind us and we have to shift brands and abandon the infamous Cat brand. brand loyalty does not start the morning after the sale..

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