Polaris Industries Inc. just announced this morning that it has agreed to purchase  Transamerican Auto Parts Company (“TAP”), a privately held, vertically integrated manufacturer, distributor, retailer and installer of off-road Jeep and truck accessories, for $665 million. In a press release sent out this morning, Polaris notes the purchase price implies “a multiple of approximately 9.0 times TAP’s EBITDA for the 12 months ended September 30, 2016.”

TAP sells and installs an extensive line of accessories for Jeep and truck enthusiasts, including products manufactured under its seven aftermarket brands that include Pro Comp, Rubicon Express, Smittybilt, Poison Spyder, G2, LRG and Trail Master. Transamerican Auto Parts is the largest retailer and installer in the North American market, selling through its own retail and on-line network while also supporting numerous independent accessory retailers/installers. In the last year, ending September 30, 2016, TAP has generated approximately $740 million in sales.

“We are excited to add TAP’s market leading multi-channel business, proprietary brands, proven management team and experienced employees to the Polaris portfolio,” said Polaris Chairman and Chief Executive Officer Scott W. Wine. “This transaction is consistent with our long term strategy, provides us an immediate leadership position in a growing market, and allows us to accelerate Polaris’ growth and profitability. TAP’s products and services for customers in the off-road four-wheel-drive (‘4WD’) market correspond closely to our Off-Road Vehicle (‘ORV’) business. Further, by broadening TAP’s proprietary product lines, expanding its retail and distribution footprint, where appropriate, and cross-selling both companies’ extensive product offerings to a large combined installed base, we believe we will create significant value for our stakeholders. Our similar cultures, centered on innovative brands and performance, make TAP a great addition to Polaris’ expanding portfolio.”

“Over the past 55 years, our employees have built a company that prides itself on serving our customers with quality products at competitive prices,” said Greg Adler, TAP’s President and Chief Executive Officer. “We see tremendous opportunity for further growth as we become an integral part of the Polaris organization. Combining TAP with Polaris’ aftermarket brand portfolio facilitates significant synergies, while Polaris’ financial resources provide the backing we need to pursue a variety of growth prospects we have identified across the organization.”

The press release goes on to highlight more specifics on the deal:

Strategic and Financial Benefits
• Highly Complementary Product Lines: This acquisition creates a leading company across the 4WD offroad enthusiast market and extends Polaris’ presence in aftermarket accessories to attract new consumers to Polaris’ existing portfolio. In particular, TAP’s four-wheel-drive aftermarket products are highly complementary to Polaris ORV business.

• Expanded Accessories Portfolio and New Product Innovation Capabilities: Significant opportunities exist to incorporate TAP’s considerable off-road product development expertise into the creation of innovative accessories and capabilities for Polaris Engineered product offerings, while utilizing Polaris’ financial strength to accelerate TAP’s product development for its Jeep and truck customers.

• Significant Growth Potential: Transamerican Auto Parts manufactures and sources seven proprietary brands and sells and distributes products through multiple channels, including 75 4Wheel Parts stores and two robust online platforms (www.4wheelparts.com and www.4wd.com). TAP sells its brands, as well as more than 200 non-proprietary leading brands, through its own distribution channels and various independent retailers/installers. Polaris’ financial strength creates opportunities to accelerate TAP’s market penetration, and where appropriate, sell select Polaris aftermarket brands through TAP’s retail outlets.

• Compelling Financial Benefits: The transaction is expected to be accretive to Polaris’ earnings per share, excluding purchase accounting/acquisition costs, for the full year 2017. The Company expects meaningful annual cost savings within three years following closing, primarily from efficiencies related to procurement, distribution, and expanded product offerings.

The transaction is subject to regulatory approval and other customary closing conditions, and is expected to close by year-end 2016. Following the closing of the transaction, TAP will operate as a distinct business unit reporting to Steve Eastman, Polaris’ PG&A President. Polaris expects to fund the acquisition with borrowings under existing credit facilities.

BofA Merrill Lynch acted as exclusive financial advisor to Polaris, and Faegre Baker Daniels LLP acted as Polaris’ legal advisor. Jefferies acted as lead financial advisor to Transamerican. Houlihan Lokey also served as financial advisor to TAP and Sullivan & Cromwell acted as TAP’s legal advisor.

Call and Webcast information
Polaris Industries Inc. will host a conference call and webcast today at 8:00 a.m. central time to further discuss the TAP acquisition. The call will be hosted by Scott Wine, Chairman and Chief Executive Officer; Mike Speetzen, Chief Financial Officer; and Bob Mack, Senior Vice President, Corporate Development and Strategy. A slide presentation and link to the webcast will be posted on the Polaris Investor Relations website at ir.polaris.com. To listen to the conference call by phone, dial 877-706-7543 in the U.S. and Canada, or 973-200-3967 internationally. The Conference ID is # 98314655.

A replay of the conference call will be available approximately two hours after the call for a one-week period by accessing the same link on our website, or by dialing 855-859-2056 in the U.S. and Canada, or 404-537-3406 internationally.