Polaris Industries Inc. (NYSE:PII)(PSE:PII) and KTM Power Sports AG ("KTM") today jointly announced that they will  continue their strategic partnership at an operational and technical level but that they no longer anticipate that Polaris will acquire a majority equity  interest in KTM.

source: polarisindustries.com / ktm.com

On July 19, 2005 the companies announced that Polaris  purchased approximately a 25 percent interest in KTM and that Polaris and KTM's largest shareholder, Cross Industries AG ("Cross"), had entered into an  option agreement which provided that, under certain conditions in 2007, either Cross could purchase Polaris' interest in KTM or, alternatively, Polaris could purchase Cross' majority interest in KTM. Although the options are not  exercisable until 2007, it is likely that under the terms of the option agreement, Cross would have the initial option to purchase Polaris' equity  interest in KTM. On July 19, 2005 the companies also announced that during the first phase of the partnership each company would be run independently and that Polaris and KTM would work on several  specific cooperative projects.    

"Our teams have worked well together over the past year. The strategic partnership has accomplished a tremendous amount so far and achieved nearly all  our goals during the first 12 months of its existence." said Tom Tiller, Polaris' CEO. "For instance, in February of this year Polaris and KTM entered  into a long-term exclusive engine supply agreement for ATV applications and in March of this year KTM became Polaris' distributor in Germany. Additionally,  our co-development projects are progressing nicely and we expect to make an exciting announcement about one of our projects in the near future. These and  other joint cooperation projects will continue into the future. I expect the technical cooperation between our companies to continue to be strong in the coming years."    

"We are very pleased with the results of the first phase of the strategic partnership and look forward to continuing the relationship" said Stefan  Pierer, KTM's CEO. "Nevertheless, Rudolf Knunz (the other principal in Cross) and I have recently informed Polaris of our intention not to sell Cross'  interest in KTM to Polaris. We wish to remain in control of KTM and for KTM to  remain an independent company."   




Tom Tiller concluded, "When we structured Polaris' path toward complete ownership of KTM as a 2-staged process, we recognized that this was a  possible outcome. Polaris continues to own a 25 percent equity interest in KTM and we  continue to have confidence in the KTM management team and their ability to execute the KTM operational plan."