Polaris bought auto parts business for $665M; it will sell it for $50M

Polaris is unwinding a $665 million acquisition it made in 2016 under its previous chief executive. Now, the Medina-based company said it will sell the Transamerican Auto Parts (TAP) business for only $50 million net of cash, debt and other costs.

The company said the retail operation did not fit into its core business.

"We have a clear vision to be the global leader in powersports," said Mike Speetzen, Polaris' chief executive, in a news release. "Our decision to divest TAP better positions us to capitalize on growing consumer interest and demand for our powersports offerings."

TAP is an omnichannel retailer of aftermarket parts and accessories for Jeep and other off-road four-wheel vehicles that has been in business since 1961. The deal with Colorado-based Wheel Pros will include all of TAP's brands, product lines, manufacturing operations and distribution facilities, the company said in a Thursday filing with the Securities and Exchange Commission.

The deal also includes more than 100 4 Wheel Parts retail locations. TAP's 1,700 employees also will move to Wheel Pros.

Polaris purchased TAP under previous CEO Scott Wine for $665 million to boost its aftermarket parts and accessories business while moving into the retail business for the first time.

Wheel Pros is a designer, maker and distributor of aftermarket wheels that is backed by the private-investment firm Clearlake Capital.

The deal is expected to close in the third quarter and is estimated to provide Polaris with $135 million in additional cash in the second half of the year from the purchase price and cash tax benefits related to the deal. "It supports our long-term financial targets and is expected to have a positive impact on the EBITDA [earnings before interest, taxes, depreciation and amortization] margin," Speetzen also noted.

TAP was a part of Polaris' Aftermarkets segment that generated $930 million in revenue in 2021, with TAP contributing nearly $760 million.

Sales for Aftermarkets in the first quarter were down 5% to $218 million, with TAP down almost 9% "due to lower availability of new used SUVs and trucks for consumers to upfit," said Bob Mack, the company's chief financial officer, in Polaris' quarterly conference call.

Polaris has made other divestitures in the last two years in order to concentrate on its core powersports businesses. In October, it announced it would divest the Global Electric Motorcar (GEM) and Taylor-Dunn businesses eventually, selling those to former Polaris executives who formed a new company called Waev Inc.

In 2020, it stopped making certain Rinker, Striper and Larson FX boats in order to concentrate on core brands within its marine business.