Polaris Industries has announced that it has bought back 3.96 million shares of the company’s stock from Fuji Heavy Industries, for the tidy sum of $497.5 million — roughly 6% of Polaris’ total market capitalization.
Paying for the stock purchase with roughly $247 million in cash, and $250 in credit, the move is a response to Polaris’ continued push to develop its own engines in-house.
For some background, Fuji Heavy Industries was the sole-engine supplier to Polaris from 1968 until 1995, at which time Polaris began developing its own power plants.
Despite that shift nearly 20 years ago, Fugi has had an integral part of Polaris’ business up until this point, and in 2013 one in four engines in the Polaris model lineup was built by Fuji Heavy Industries.
For 2014 onward though, the use of Fuji engines is expected to drop as Polaris produces more of its own units.
“FHI has been a valued partner and long-term engine supplier since 1968 and a significant, loyal and stable shareholder since we first began trading as a public company in 1987. FHI approached us with the opportunity to repurchase their entire block of Polaris stock at a negotiated discount to the most recent average market price,” said Polaris Chairman and CEO Scott Wine.
“Our decision to repurchase these shares demonstrates not only the confidence we have in the fundamentals of our business, but also our long-term growth prospects and the commitment we have to provide an above-average return to our shareholders. However, this opportunistic share repurchase transaction in no way signals a change in our strategic direction.”
“We continue to believe there are abundant opportunities to further expand and diversify our businesses both organically and through acquisitions and we have ample borrowing capacity and strong cash flow to fund the anticipated growth of Polaris,” concluded Wine.
Polaris stock is up 4% at the time of this writing. Goldman, Sachs & Company acted as financial advisor to Polaris in this transaction.