Textron, Inc.(TXT): Buys Arctic Cat (ACAT) - Set to Go Extreme

Matthew Paul  |

While the Dow hitting 20,000 is historic news today, it isn’t the only news to focus. On the heels of their fourth quarter 2016 results, Textron, Inc. (NYSE:TXT), a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services, announced their agreement to acquire Arctic Cat, Inc. (NASDAQ: ACAT), a leader in the recreational vehicle industry. They manufacture side-by-sides, snowmobiles, sleds, and ATVS. With sales of $632 million in 2016, ACAT is the 41st largest public company in Minnesota.

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TXT will acquire, pending shareholder and regulatory approval, Arctic Cat for approximately $247 million, and will assume existing debt. On the acquisition’s value, TXT CEO Scott Donnelly said, “Arctic Cat is a superb strategic fit for Textron…with our recent product introductions in the outdoor recreational vehicle market under the Stampede name, we believe Arctic Cat, one of the most recognized brands in the industry, provides an excellent platform to expand our portfolio, increase our distribution and create growth within our Specialized Vehicles business.”

From ACAT, CEO Christopher Metz said, “Arctic Cat’s board believes that Textron’s offer delivers compelling and immediate value to our shareholders… this transaction presents increased opportunities for the business to leverage our combined scale, accelerate growth and enhance product innovation in ways that will benefit our customers, dealers and employees.”

As part of the agreement, ACAT will retain its current manufacturing, distribution, and operational facilities.

At the time of this writing, TXT is trading at $45.97, down 6.91% and ACAT is trading at $18.50, up 41.33%

Looking forward from their 2016 fourth quarter financials and acquisition news, TXT s forecasting 2017 revenues to be approximately $14.3 billion, up 4%. However, fourth quarter 2016 revenues were $3.8 billion, down 2.5% from fourth quarter 2015.

Textron intends to update its 2017 outlook to include ACAT following the completion of the transaction. The 2017 forecast is seemingly due to this acquisition and the fact TXT has “completed the first flight of our production Scorpion jet,” and continued investment in that program to “position us to compete for opportunities in 2017.”

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