Harley-Davidson Shares Up ~15% On Possible Private Equity Interest

Friday morning shares of Harley Davidson HOG and Polaris PII rose roughly 15 percent and roughly 7 percent respectively. Benzinga first reported the chatter of a possible interest from KKR & Co KKR. KKR had been rumored back in 2010 as a possible acquirer of the American motorcycle company.

A quick review of the potential validity of the chatter yielded a reasonable storyline to believe the chatter. Polaris has been seen some pressures on its business according to a note from Longbow on June 10.

What we said:

"KKR has been rumored previously as a possible buyer of Harley Davidson. Back in 2010 chatter circulated of interest following nearly 2 years of performance that came in below analyst expectations. Harley-Davidson competitor Polaris has been experiencing mixed performance reviews lately.

On June 10th Longbow issued a report on Polaris highlighting weak channel check responses. Longbow said their channel sources said: "I'm down 30% in the month of May and I'm expecting to be down all year. Competition is catching up and the election year does not help our cause either. It's tough times for PII dealers right now."

And also: "I am located in a heavy oil dependent region and our sales have been horrible in May. We are down almost 20% y/y and I think June is going to be like May unfortunately.

Furthering the point, Lake Street said in a note on Polaris from June 29th:

"The stock has sold off significantly due to near-term concerns; however, we believe its cash flows, balance sheet and market position should allow the company to emerge in a stronger position when economic factors improve."

Polaris sales are weakening and should the economic environment improve, expectations are for a rebound in performance during 2017. If KKR wants to take a stab at Harley Davidson, now would be a great time."
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