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Investment means Arctic Cat less primed for buyout, analyst says

Arctic Cat’s decision to invest $27 million into its manufacturing facilities in Minnesota “leads us to believe the likelihood of management ‘cleaning up’ the company for a sale is now lower, while the likelihood of it going alone is now higher. We had thought a buyout by an industry player, like China’s CFMOTO, could be a possible positive end-game for investor,” according to a research note provided to Powersports Business by BMO Capital Markets analyst Gerrick Johnson.

Johnson goes on to report that “[on] its own, ACAT’s engineer and design teams have come up with some neat products and showing pluck against bigger and stronger competition with better distribution. But Arctic Cat is the sixth or seventh player in off-road, and the third player in a four-player snowmobile field, and its competition continues to get tougher, up against a dominant Polaris, growing BRP, reenergized Honda, Yamaha and Kawasaki, as well as the venerable John Deere and upstarts like KYMCO from Taiwan and CFMOTO from China.”

Johnson adds that while BMO has been “encouraged by changes being made at the company, and dealers' generally positive reaction to these changes, we think it is still too early to call the turnaround a success. In fact, post 4Q results, we are a bit more concerned that the dealer inventory reduction program and turnaround of the company will take longer than originally expected.

“Change will take time, and maybe longer than investors may currently anticipate. Biting the bullet and clearing excess inventory is a good first start, but aged inventory seems to be a symptom of a bigger cultural problem. Management has assured investors that a strategic road map was still in the process of development. We will get this roadmap on May 21, when the company hosts an investor/analyst event in New York City.”

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  1. I appreciate that we want to put a positive spin on the industry, and particularly on the future of an American-owned company, but it really is misleading to have an analyst say " dealers generally positive reaction to these (inventory) changes" when said dealers just gave ACAT a Satisfaction Index score of 12 out of 100 immediate, 18 out of 100 3-5 years projected. 12-18% Satisfaction is in NO WAY the response of dealers confident in their brand. How about a real, in-depth discussion/analysis with real 'Cat dealers, as opposed to powersports articles as written by the Street?


    • Arctic Cat should be building motorcycles to try to catch up with Polaris. How much longer are they going to let Polaris gather steam and become unstoppable? C'mon AC. Grow some onions!


      • Michael DeBagio

        Very well written......


        • Arctic Cat has been doing great things with its products and we as the dealers have seen it. If Arctic Cat would promote its products a little better they could defiantly be one of the top contenders in the market especially with their Prowlers and Wildcats. On a further note, remove your products from Bass Pro Shops. Every time we go somewhere that has a Bass Pro I go in and talk to them about the Arctic Cats but I don't get even half of the information I should if I were looking to buy an ATV or UTV.


          • Things are a bit more grim than this article implies. This is the first article, though, that at least states that a change of corporate culture is much needed. The only way to bring that about, IMHO, is to invest in facilities far from the frozen tundra so as to attract some new talent to the company. The fact that they are investing $27M in MN makes that seem highly unlikely in the short to medium term, and that is sad.


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