Arctic Cat

Textron Inc. (NYSE: TXT) has reached an agreement to buy Arctic Cat Inc. (Nasdaq: ACAT), a manufacturer of all-terrain vehicles (ATVs) and snowmobiles, for $247 million in cash. The deal aims to help Textron extend its portfolio of outdoor recreational products, as the company saw a decline in revenue across its aviation division that sales Cessna business jets.

“With our recent product introductions in the outdoor recreational vehicle market under the Stampede name, we believe Arctic Cat...provides an excellent platform to expand our portfolio, increase our distribution and create growth within our Specialized Vehicles business,” states Textron CEO Scott Donnelly.

Artic Cat is a Minneapolis-based designer and manufacturer for the recreational vehicle industry. The target engineers ATVs, side-by-sides, snowmobiles, garments and other related accessories under the Arctic Cat and Motorfist brand names. Artic Cat’s accessories consist of: float avalanche airbags, bumpers, cabs, luggage racks, lights, snow plows, backrests, windshields, wheels, track systems, and winch kits. The company sells its products using a network of independent dealers and distributors across the U.S., Canada, Europe, Russia and the Middle East.

Textron is a multi-industry company that services the aircraft, defense, industrial and finance industries. The buyer manufactures and sells business jets, turboprop aircraft, military trainer and defense aircraft, commercial and military helicopters, smart weapons, and airborne and ground-based sensors. Textron distributes products to clients under brand names such as: Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, Textron Systems, and TRU Simulation + Training.

Textron operates from five divisions, including: Textron Aviation, Bell, Textron Systems, Industrial, and Finance. Revenues for the aviation division dropped $51 million in the fourth quarter of 2016, accounting for nearly 38 percent of total revenue. The decline comes amid stagnant global growth, nudging business jet manufacturers to offer more discounts and incentives to prevent buyers from canceling or delaying orders. The company opted to experience a decrease in sales rather than to cut prices, according to Donnelly.

"Frankly we are not willing to go to the price levels where some people wanted to go in order to get deals done," Donnelly told analysts on a conference call.

Recent outdoors-related deals include: Falconhead Capital’s deal to acquire Kwik Tek, a maker of Airhead wakeboards and other outdoor branded products; Peak Rock Capital’s purchase of Do Outdoors Inc., the owner of fishing product manufacturer Lew’s Fishing; Cabela’s Inc.’s (NYSE: CAB) agreement to purchase Bass Pro Shops for $5.5 billion; and Bass Pro Group LLC’s deal to acquire Fishing Holdings LLC from Platinum Equity Partners. In 2015, Norwest Equity Partners picked up a stake in ski and snowboard equipment retailer Christy Sports and Johnson Outdoors said it will add underwater watch maker Seabear.

Shearman & Sterling is serving as legal counsel to Textron on the deal. Robert W. Baird & Co. is serving as financial adviser to Artic Cat and Fredrikson & Byron is acting at legal counsel.


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