Harley-Davidson plans to sell a $5 billion stake of its financial services business, Harley-Davidson Financial Services, to global investment management firms KKR and PIMCO.
Under the terms of a new agreement unveiled Wednesday, HDFS will also sell 4.9% common equity interests to investment vehicles managed by KKR and PIMCO.
Harley-Davidson will retain control of HDFS, which will continue to originate and service existing and new consumer loans. The company expects HDFS operating income to grow back toward pre-transaction levels over time.
Harley-Davidson plans to use approximately $1.25 billion of cash unlocked through the transaction to reinvest to support demand-driven investments, reduce $450 million of its debt and return approximately $500 million to shareholders.
“This transaction delivers benefits to all of Harley-Davidson’s stakeholders and marks the beginning of an exciting new chapter for HDFS,” said Harley-Davidson chairman, president, and CEO Jochen Zeitz. “From the outset of this process, we set out to demonstrate the class-leading returns of HDFS, create a long-term stable funding mechanism, and maintain the strong financial profile of HDFS, all without impacting service to dealers and customers. Our strategic partnership with KKR and PIMCO achieves each of these core objectives, valuing the HDFS business at a premium multiple and transforming it into a more capital-efficient business with an expected significantly higher return on equity.”
KKR’s investment comes from KKR-managed credit funds and accounts via the firm’s asset-based finance strategy. PIMCO’s investment comes from funds and accounts focused on PIMCO’s private strategies.
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