With China’s CFMOTO indicated as its most likely suitor, struggling American ATV and snowmobile manufacturer Arctic Cat is trying to downplay the possibility of a takeover bid by slashing excessive dealer inventory of unsold dust-gatherers and making a £17.5m investment to improve production facilities at its Minnesota plant.
BMO Capital Markets analyst Gerrick Johnson had originally put CFMOTO’s name in the frame for an Arctic Cat buy-out, and is not yet convinced that the company’s efforts to revive its fortunes will bear sufficient fruit to fend off an aggressive bidder.
In an advisory note to investors, Johnson said: “Arctic Cat is the sixth or seventh player in off-road, and third in a four-player snowmobile field. And its competition continues to get tougher, up against a dominant Polaris, growing BRP, re-energized Honda, Yamaha and Kawasaki, as well as the venerable John Deere and upstarts like KYMCO from Taiwan and CFMOTO from China. While we have been encouraged by changes being made at the company, and dealers’ generally positive reaction to these changes, BMO thinks it is still too early to call the turnaround a success.”
Arctic Cat posted a 32% drop in sales revenue during the first three months of 2015 (the fourth quarter of its financial year), reflecting a massive cut in wholesale ATV shipments to dealers. This resulted in a quarterly operating loss of £18.8m, against a loss of £1.7m in the equivalent period last year. It suffered an annual net loss of £14m.
CFMOTO is best-known in the UK as the source of WK-branded 650cc parallel-twin motorcycles — the first Chinese bikes to make their debut on an Isle of Man TT grid in the Lightweight “supertwin” event. The company is also a major ATV producer and would be keen to acquire relevant Arctic Cat technology and enhanced US market penetration.