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POLARIS INDUSTRIES INC. AND KTM ANNOUNCE STRATEGIC PARTNERSHIP
MINNEAPOLIS, July 19, 2005 - Polaris Industries Inc. (NYSE/PSE:PII)
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."
More information may be found at
www.polarisindustries.com under the investor relations
section.
About Polaris
Information about the complete line of Polaris products, apparel
and vehicle accessories is available from authorized Polaris
dealers or from the Polaris homepage at
www.polarisindustries.com.
With annual 2004 sales of $1.8 billion, Polaris designs,
engineers, manufactures and markets snowmobiles, all-terrain
vehicles (ATVs), Victory motorcycles and the Polaris RANGER for
recreational and utility use.
Polaris is the recognized leader in the snowmobile industry; and
one of the largest manufacturers of ATVs in the world. Victory
motorcycles, established in 1998 and representing the first
all-new American-made motorcycle from a major company in nearly
60 years, are rapidly making impressive in-roads into the
motorcycle cruiser marketplace. Polaris also enhances the riding
experience with a complete line of Pure Polaris apparel,
accessories and parts, available at Polaris dealerships.
Polaris Industries Inc. trades on the New York Stock Exchange
and Pacific Stock Exchange under the symbol "PII," and the
Company is included in the S&P Small-Cap 600 stock price index.
About KTM
KTM Sportmotorcycle AG, formerly known as Cross Holding AG,
designs, engineers, manufacturers and markets off-road and
on-road motorcycles and related parts, garments and accessories
with annual sales of 402 million Euros in 2004. The product
portfolio consists of over 23 different off-road and on-road
motorcycles ranging in engine size from 50cc to 950cc.
KTM is best known for it racing heritage. KTM has won 106 World
Championship Titles, 10 in 2004 alone. The Company employs
approximately 1,500 employees and assembles its engines and
motorcycles in Mattighofen, Austria. Additionally, the Company
manufactures exhaust systems, frames,
shocks and spoke wheels. KTM sells it motorcycles through a
network of
over 1400 independent dealers and approximately 50 distributors
worldwide
with Europe being its strongest market. Information about the
complete
line of KTM products, apparel and vehicle accessories is
available from authorized KTM dealers or from the KTM homepage
at www.ktm.com.
KTM Power Sports AG, formerly known as Cross Holding AG, is
traded on the Vienna stock exchange under the symbol CRO, which
is in the process
of being changed to the symbol KTM. Additional information on
KTM Power
Sports AG can be found at
www.cross-ag.com,
which is in the process of being changed to
www.ktm.com/investor relations.
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