Wedbush Remains Sidelined as Polaris Industries (PII) Announces Transamerican Auto Parts Acquisition
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Wedbush reiterated a Neutral rating and $77.00 price target on Polaris Industries (NYSE: PII) following the company's announced acquisition of Transamerican Auto Parts Company (TAP) for $665M. The acquisition is being funded through the company’s existing revolver and term loan.
Analyst James Hardiman commented, "The acquisition is expected to be accretive to PII’s FY17E EPS by $0.25-$0.30, excluding purchase accounting and acquisition costs. However, the EBITDA margin for TAP is approximately 8%, suggesting that this will be dilutive relative to the (2016) EBITDA margin generated by PII, while the high-teens TAP returns on capital falls well short of returns for PII. Within three years after the close, PII expects annual cost savings/synergies of ~$20M, driven by efficiencies in procurement, distribution and an expanded product offering. There could also be some revenue synergies over time as well."
Shares of Polaris Industries closed at $76.15 yesterday.
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