Wednesday, September 7, 2011

Kolpin Buys Cycle County- Creating the largest ATV/UTV Company

Kolpin Buys Cycle Country’s ATV Division

From Powersports Business
Kolpin Outdoors Inc. is purchasing Cycle Country Accessories Corp.’s ATV Accessories product line for $9.7 million, subject to certain adjustments and contingencies, the companies announced Thursday.
Cycle Country, based in Spencer, Iowa, is selling only its ATV Accessories product line. It’s not selling any other operating entity of the company, manufacturing operations, real estate, machinery and equipment, or working capital assets. Cycle Country will continue to manufacture ATV Accessories for Kolpin under a manufacturing agreement between the companies.
“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,” Cycle Country CEO Robert Davis said.
At closing, $3.2 million in cash will be paid to Cycle Country. Another $1 million will be paid in three installments, on Oct. 1, Jan. 12 and April 1, subject to Kolpin’s right to offset certain claims against such amount. 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. The $5.5 million balance will be paid over three years based on an earn-out provision, under which the company will receive a percentage of net sales for the three one-year periods following closing. Kolpin, headquartered in Fox Lake, Wis., also agreed to assume certain liabilities, including liabilities relating to the operation of the product line after closing and certain warranty obligations of Cycle Country.
“We are very pleased be able to bring together two of the premium brands in the Powersports space, Kolpin and Cycle Country,” said Tom Lutes, President and CEO of Kolpin. “Our intentions are to keep the current Cycle Country products and brand exclusive to the Powersports channel, while pursuing new, differentiated product in other channels under the Kolpin brand.” Lutes went on to say “this significant addition to the Kolpin family will insure our leadership position in offering our customers the broadest array of ATV/UTV accessories in the business.”
The sale, which is expected to close in the next 30-45 days, is subject to the satisfaction of customary closing conditions. However, it has been approved by the stockholders of Cycle Country who hold voting rights to greater than 51 percent of the outstanding stock in the company, so the sale is not subject to additional stockholder action. Closing adjustments, payment of debt and accrued liabilities, and contingent payment conditions will reduce the proceeds received from the transaction.
“This latest news of the Cycle Country purchase really speaks to how aggressive Kolpin is being in this market right now,” John Prusak, publisher of ATV Magazine, told Powersports Business. “In the past couple of years we’ve seen the company partner with emerging brands like Premier Manufacturing and KYMCO, build relationships with other vendors and consistently introduce more new products than anybody. In a relatively tough climate, Kolpin stands out as a company on the move.”
Powersports Business reported on Tuesday that Cycle Country’s net sales had dropped 48.8 percent to $911,874 in its most recent quarter.

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