Purchase of Cycle
Country division to increase Kolpin offerings
By Liz Hochstedler
Kolpin has appeared for a while as a source for nearly any ATV accessory. The company sells ATV racks, lights, grips, hitches, storage and more, but there was one product line clearly missing — snowplows.
Now Kolpin has filled that hole, by purchasing Cycle Country Accessories Corp.’s ATV Accessories product line, Kolpin announced in early September.
“We’ve been wanting to access one of the largest categories within the ATV/UTV accessory business, being snowplows, for some time, and we’ve looked at various opportunities, actually looking at doing it internally or through acquisition,” Kolpin president and CEO Tom Lutes told Powersports Business.
Kolpin’s $9.7 million acquisition of Cycle Country includes the entire ATV accessory division, but because of Kolpin’s already wide range of accessories, the plow products were of the most interest.
“Kolpin always had a major presence in the utility segment, and [snowplow] really was the last large segment that we didn’t participate in, so in terms of just rounding out the assortment of the key utility activities, that was the last large segment, the last missing piece of the puzzle,” Lutes explained.
Kolpin and Cycle Country had been talking on and off about the acquisition for a while, and the sale was mutual, Lutes said. The sale had yet to close by the time this article went to print, but it had already been approved by Cycle Country stockholders who hold voting rights to greater than
51 percent of the outstanding stock in the company. The Sioux City (Iowa) Journal reported in May that Cycle Country CEO Bob Davis and investor Paul DeShaw owned 52 percent of the total stock.
“After exploring all available alternatives, it was determined that selling the ATV Accessories product line was the best opportunity to maximize the value of the business for our company stockholders, as well as to provide the best opportunity for our customers, employees and suppliers,” Davis said in a press release.
When the Cycle Country opportunity presented itself, Kolpin jumped in.
“It does several things,” Lutes said. “Again, strategically, it sort of completes the circle and gives us the full array of product segments for almost any utility or land-use application for ATVs/UTVs. Second, it adds significant buy-in to our company that allows us to use it differently than we already do. Third, it secures a significant presence in the powersports channel.”
With the acquisition, powersports is now the largest channel that Kolpin serves. And though the excitement at Kolpin mostly surrounds the plow products, the company is also looking forward carrying Cycle Country’s newest ATV accessories.
“We’re interested in the new things that they had on the table, both the DIX-C, as well as the X-Factor, which is like a plow in a box, a three-piece collapsible plow.”
The DIX-C, or Drive-In Exchange, is a push tube accessory that can be used with a variety of implements, including plows, a Trash Shuttle, a Ball Hitch Receiver and more accessories if Kolpin adds them. The DIX-C was featured in the Sept. 5 issue of Powersports Business.
Lutes said despite ATV unit sales being slow to recover from the recession, the accessory business at Kolpin never felt as sharp of a hit. He admits there’s a risk in adding ATV accessories while unit sales are low, but he’s still confident in the purchase.
“Yes, there’s a risk, not only because of the ATV sales, which are somewhat mitigated by the increase in UTV sales, but also because they’re seasonally-dependent products,” he explained. “The whole transaction structure we’ve put in place largely mitigates any significant risk there.”
At closing, $3.2 million in cash will be paid to Cycle Country. That is followed by another $1 million to be paid in three installments, which began Oct. 1 and will continue on Jan. 12 and April 1. The $5.5 million balance will be paid over three years based on an earn-out provision, under which Cycle Country will receive a percentage of net sales for the three one-year periods following closing. The purchase price may also be increased or decreased to the extent the value of the finished goods of the product line inventory changes prior to closing.
For the current snow season, Cycle Country will continue to manufacture the acquired ATV accessories. The short-term agreement between the two companies will run until the snow season is over.
“We’re in the middle of the season and certainly couldn’t risk disruptions to the customer trying to do it any other way,” Lutes explained, adding that the manufacturing situation past this winter has yet to be determined.
As the acquisition closes, Kolpin is looking forward to adding the snowplows and other Cycle Country ATV accessories to its business.
“We’ve developed a brand and our industry presence — we’re one of the leaders in the industry,” Lutes said. “This certainly solidifies our position as that, so we’ll continue to build on that piece and foundation that we’ve put in place.”