March, 1978

Arctic to Acquire Scorpion

Will Maintain Both Brands ...

Story from Minnesota Snowmobiler, official publication for the Minnesota Association of Snowmobilers and the Snowmobiler's Association of Minnesota

THIEF RIVER FALLS - Two proud Minnesota snowmobile brands will now be under the same corporate ownership as Arctic Enterprises, inc. has announced an agreement whereby it will acquire Scorpion, and will continue to maintain both Arctic Cat and Scorpion sales networks and product lines.

Arctic announced on March 13 that Arctic Industries, Inc. a wholly-owned subsidiary, will acquire all the outstanding capital stock of Scorpion Industries from Scorpion, Inc. for cash and a note.  The financial terms of the transaction were not disclosed.

Scorpion, Inc. of Crosby, Minn., employs 120 people and makes Scorpion snowmobiles, snowmobile clothing, Cuyuna engines and Scorpion mopeds.  Arctic, with headquarters in Thief River Falls, manufactures Arctic Cat snowmobiles, Arcticwear winter outerwear, Silverline and Lund boats, Wetbike watercycles, and Spirit outboard motors.

In a formal statement, Harvey V. Paulson, president of Scorpion and its principal stockholder, said: "In sincerely believe that the addition of Arctic's financial strength to our business will enable us to have strong marketing and product development programs.  This combination with Arctic will be beneficial to our customers, our dealers and our employees.

In the same statement, John C. Penn, president of Arctic said: "We are pleased to add Scorpion to our list of high quality recreational products.  We intend to maintain separate Scorpion and Arctic Cat sales networks and product lines.  Harvey Paulson and his management team will continue to be responsible for the operation of Scorpion's business."

The Minnesota Snowmobiler subsequently learned that Arctic Cat snowmobiles will continue to use Suzuki Spirit engines and that Scorpion will continue to be powered by its own Cuyuna two cycle engines.  (Scorpion acquired the entire Rockwell/JLO engine manufacturing operation several years ago and moved the complete production and development operation to Crosby from West Germany.)  Scorpion also recently began production of its own line of mopeds, and the moped business will continue as scheduled a Scorpion spokesman said.

In a comment in the Minneapolis "Tribune," Penn commented that "we'll continue to manufacture Scorpion in Crosby this season, and then evaluate how best to use the facilities there and in Thief River Falls."

Penn also noted that the Justice Department might be interested in the acquisition, and added that "I hope it looks at it like we do, as a strengthening of competition, because we'll be able to help them (Scorpion) with product development and marketing programs."

Arctic employs about 1,700 people during peak production periods, and is the largest U.S. snowmobile manufacturer.  Scorpion is the third largest of the three remaining Minnesota-based snowmobile manufacturers.

Arctic Enterprises, Inc. recently reported sales of $89,505,000 and net income of $2,515,000 for the nine months ended Dec. 31, 1977.  Scorpion, Inc. is a privately-owned corporation and financial information concerning its operation is not available, although the company did report a small profit last season.

No timetable was announced for the acquisition, but it is expected that it will all have been finalized prior to the 1978-79 snowmobile sales season.  The confirmation of the proposed transaction is dependent upon the execution of a definitive agreement between Arctic and Scorpion and upon the approval of the various boards of directors and other parties.

Industry-wide snowmobile sales this season are expected to be 220,000 up from 195,000 during the 1976-77 season.  Arctic's share of that market is projected to be about 53,000; and Scorpion's approximately 6,500 snowmobiles sold.

One corporate owner of two product lines is not new in the snowmobile business.  Bombardier owns, manufactures and markets both the Ski-Doo and Moto-Ski lines, and Outboard Marine Corporation manufactured and marketed both the Johnson and Evinrude snowmobile lines prior to its decision to drop the snowmobile product line.