Polaris Buys 24% Of KTM

Even I care! Who would I pick on?
But seriously,more capital is usually
a good thing,maybe KTM will let Polaris
make their seats for them. :lol:

maybe polaris couls make submarines! 1/72 scale of course!



Taffy

They would be better than the full size
ones the Russians build.Maybe the Ural
company makes them.

Food For Thought

Via the Internet:

>Polaris Hopes to Go Big With KTM
>By Dirck Edge www.motorcycledaily.com
>
>Both Polaris and KTM have announced a somewhat complex joint relationship
>that begins with the purchase by Polaris of a 24% interest in KTM's parent
>company, KTM Powersports AG. The details are set forth below in the two
>press releases (the first from KTM, and then from Polaris). A few things
>stick out.
>
>First, Polaris CEO Tim Tiller states Polaris has a five-year "roadmap to
>make Polaris the most dominant brand in the powersports industry".
>Certainly, this is a tall order, but both of these companies are extremely
>aggressive and successful. They also arguably already lead two powersports
>divisions, including snowmobiles (Polaris) and off-road motorcycles (KTM).
>Furthermore, the companies have virtually no competition with one another
>at present, but together operate in almost every category of powersports
>manufacturing. On paper, an extremely good fit! As an example, when it
>comes to street motorcycles, Polaris has made a good start with cruisers
>(through its Victory brand), but has no sportbikes or sport machines, at
>present. Meanwhile, KTM is now introducing some very promising sport
>machines, but has nothing in the cruiser category.
>
>Interestingly, both Polaris and KTM have hedged their bets. After two years
>(in 2007), options exist whereby either KTM will buy back its shares from
>Polaris, or Polaris will become the majority shareholder in KTM (gaining
>complete control). The two-year "honeymoon" will either result in a
>marriage (Polaris takes over KTM and absorbs it into a single entity) or a
>separation (KTM buys back its shares). Certainly, Polaris is planning to
>complete its acquisition of KTM in 2007 . . . hoping that the two companies
>can merge successfully.
>
>Here are the two press releases. First, from KTM:
>
> Together, both companies share the full assortment of our sports
>vehicles and they are the largest manufacturers in the POWER SPORTS segment
>outside of Japan, with a combined turnover of USD 2.4 billion.
>
> Through this co-operation, KTM can intensify its presence in North
>America and accelerate its entry into the ATV segment. The KTM POWER SPORTS
>AG and POLARIS Industries Inc. are entering into a strategic partnership,
>which is limited to a two-year period during its initial stage. Thereafter
>both partners can independently decide whether the partnership shall be
>continued or to what extent the alliance shall be deepened.
>
> Both companies shall continue their business activities as independent
>entities In the future as well.
>
> In the past business year (2004), POLARIS Industries Inc. achieved a
>turnover of approx. USD 1.8 billion with 270.000 units sold. As the largest
>non-Japanese manufacturer of ATV's, snowmobiles (world market leader), 4x4
>utility vehicles and "Cruiser"-Motorcycles under the brand name VICTORY,
>POLARIS is primarily active in the North American market.
>
> Upon commencement of the partnership, POLARIS Industries Inc. shall
>purchase a 24% share from the KTM POWER SPORTS AG, which owns 99,77% of the
>KTM Sportmotorcycles AG.
>
> It is contemplated that Stefan Pierer, managing director of the KTM
>POWER SPORTS AG, shall be nominated for a seat on the Board of Directors at
>POLARIS and that Tom Tiller, the chairman of the board (CEO) of POLARIS, be
>simultaneously nominated for a seat on the KTM supervisory board.
>
> During the first two years, the strategic partnership includes the
>following segments:
>
> Distribution:
> KTM has a strong distribution network in Europe - POLARIS has a similar
>position in North America. Each company should profit from its respective
>partner's strength. In selected European countries (Germany, Czech
>Republic, Slovakia) the distribution of the POLARIS product range will be
>handled through KTM.
>
> Product development:
> The exchange of know-how and R&D capabilities has the joint objective of
>accelerating development processes and increasing the rate of innovation
>for both companies.
>
> Manufacture:
>
> During the initial stage, KTM will supply engines to POLARIS. Also it is
>planned that KTM will do the final assembling of POLARIS ATVs in
>Mattighofen for the European market. With production sites on both
>continents there is the possibility for both companies to hedge against
>foreign exchange exposure..
>
> With POLARIS and KTM, two partners have found each other who can both
>point to exceptional economic successes and a dominant position in their
>respective business sectors. Furthermore, POLARIS and KTM share a very
>similar culture, in which the focal point is the "passion to ride".
>
> Two strong brands, established distribution networks and above all the
>companies' matching objectives - to become together the dominating power in
>the global POWER SPORTS business - are the basis of this strategic
>alliance, from which both companies shall profit.
>
>The second release, from Polaris:
>
> Polaris Industries Inc. (NYSE/PSEII) announced today that it will
>purchase a 24-percent interest in Austrian motorcycle manufacturer KTM
>Power Sports AG, formerly known as Cross Holding AG, and partner with KTM
>on several important strategic projects. The goal of the partnership is to
>strengthen the competitive position of both companies and provide tangible
>benefits to customers, dealers, suppliers and shareholders.
>
> During the first phase of the partnership, each company will continue to
>be run separately, but will work together on several specific cooperative
>projects involving new product development, engine technology sharing,
>distribution, manufacturing, and purchasing. This initial phase of the
>partnership will last approximately two years and, in addition to the
>cooperative projects, will involve the following:
>
> * Polaris will purchase a 24-percent stake in KTM Power Sports AG from
>an institutional investor for 66.6 million Euros or approximately $80
>million funded from Polaris' existing bank line of credit arrangement. This
>represents approximately a 12 percent discount to the market value of the
>shares purchased reflecting the size of the block of shares purchased and
>the fact that the shares are thinly traded.
>
> KTM Power Sports AG (formerly known as Cross Holding AG, which is
>publicly traded on the Vienna Stock Exchange under the symbol CRO), owns
>and controls KTM Sportmotorcycle AG, a leading European manufacturer of
>motorcycles with fiscal year 2004 revenue of over 400 million Euros. Over
>its history, KTM has earned a reputation for providing class-leading,
>ready-to-race, off-road motorcycles, and recently has entered the on-road
>motorcycle segment. This transaction, subject to customary closing
>conditions and regulatory approval, is expected to close during the third
>quarter of 2005. The actual number of shares purchased and the purchase
>price are subject to reduction depending upon the number of shares of KTM
>Power Sports AG outstanding on the closing date.
>
> * Polaris CEO Tom Tiller is expected to be named to the KTM Supervisory
>Board after the closing date of the transaction.
> * KTM CEO Stefan Pierer is expected to be named to the Polaris Board of
>Directors after the closing date of the transaction.
>
> The investment in KTM Power Sports AG is expected to be neutral to
>calendar year 2005 Polaris consolidated earnings per share and somewhat
>accretive for the full year 2006. There are no changes in employment
>anticipated at either company as a result of this announcement.
>
> Additionally, Polaris and KTM Power Sports' largest shareholder, Cross
>Industries AG ("Cross"), have entered into option agreements which, under
>certain conditions in 2007, either Cross may purchase Polaris' interest in
>KTM Power Sports AG or, alternatively, Polaris may become the majority
>shareholder of KTM Power Sports AG. In the latter case, the majority of the
>purchase price to Cross will be settled in Polaris shares and Cross will
>become a significant shareholder in the combined Polaris/KTM organization.
>Cross' principal shareholders are KTM CEO Stefan Pierer and KTM CFO Rudolf
>Knünz. The exercise price under both option arrangements are based on
>market-based, predetermined pricing formulas to be derived from operating
>results of both companies in 2007.
>
> "I believe this partnership will provide substantial benefits to both
>Polaris and KTM, and both company's dealers, employees, suppliers and
>shareholders for many years to come," said Tiller. "We have long admired
>the success of KTM, and are excited about working together to strengthen
>both companies. Polaris can benefit from KTM's substantial experience in
>motorcycles, an outstanding brand, leading technology, and a solid
>manufacturing presence and dealer network in Europe. Moreover, this
>relationship complements nearly every aspect of Polaris' five-year
>strategic vision, which is a roadmap to make Polaris the most dominant
>brand in the powersports industry. Further, we believe the two-step
>approach we have outlined significantly lessens the cultural and execution
>risk associated with a partnership of this magnitude."
>
> "In essence, this partnership combines the substantial strength,
>passion, and success of two industry leaders with very similar, successful
>50-year histories, but who do not compete directly today. It is a very
>natural fit for both of us," added Tiller.
>
> Mr. Pierer commented, "Polaris and KTM complement each other very well,
>and we are very excited about our new relationship. By joining forces, we
>believe we can strengthen KTM's presence in North America, reduce our
>production costs, spread our development costs over a larger base, and
>substantially accelerate our entry into the ATV business. We also look
>forward to sharing both chassis and engine technology with Polaris. The KTM
>and Polaris teams should work well together - both companies are driven by
>innovation, passion, and demand success."

I will have to admit I remain sceptical as to the probability of this arrangement being a success.On the surface it may appear these companies are a good fit,but in fact they are quite different.Polaris is very price competitive and has a questionable reputation for quality and KTM is a higher end product that sells its products primarily on quality.Both these companies are quite entrenched in there style and commitment to their own business practices.If Suzuki and Kawasaki could not work together when there products and culture are similar I see little hope for this arrangement between Polaris and KTM.
I see the Japanese giants producing more and more of their products in South East Asia and China in an attempt to remain price competitive as long as they can against the swell of industrial giants from China,who are producing ever increasing numbers and ever increasing quality machines.
Reminds me of the British brands in the late sixties playing board room games and jumping in bed with each other(financially speaking) to keep warm as the Japanese created new markets and eventually took theirs.What I am saying is that the bean counters at Polaris and KTM see the challenges ahead and feel that a joint venture may insulate them from what lies in the future.Time will tell, but history tells a different story.

Hi Nsman,
Extremely insightful and very well put.
Thank you.

Sincerely,
Dale

The back room boys at KTM pull the plug on the 990cc MOTO GP project.
Could this be first move to cut expenses on R and D to make more short term profits and increase share price.Could just be a reaction to the new engine capacity for 2007 to 800cc,or it could also be the decision to stop spending in the search for new technology as it is very expensive and has no immediate payback.KTM has spent the last 15 years pushing their development of 4 stroke engines....and today they just stopped....

nsman

budgets can escelate and rarely get smaller and in the meantime ktm aren't competitive against the bigger brands so it's time to exit stage left.

they will have learnt a great deal from the R & D on the 125GP 2T machine and the moto gp machine. now it's time to feed it into new models. their bang per buck will now be a lot better.

many a company has been washed up on the shore (cagiva come to mind followed by ducati) due to overdoing the racing budget. if ktm have saved themselves from this precipise then i'm happy for them.

put simply, nobody can afford to compete with honda and yamaha!

regards

Taffy

Hi Taffy,
Since Harold Bartol runs the KTM 2-stroke GP effort in what is basically KTM funding of his GP engine and his ongoing GP team,it is doubtful that very much of his efforts will ever trickle down to any KTM products.
While I do agree that KTM's arrangement with Kenny Robert's GP effort was ill conceived and had little hope of financial success,I do believe that the program to develop the 990 cc could not help but contribute much to KTM and their future products.This type of program always attracts the engineers and enthusiast personnel that keeps its products exiting.The GP project needed to changed and better managed for sure,but not abandoned.
I have always felt that it is the employees of a company that define its products,you suggest that KTM should not bother to try to compete with Honda and Yamaha,but to keep the employees and products exiting and vibrant the truth is they can not afford to ever give up competing.
......nsman