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3:23Now PlayingShares of Harley-Davidson Inc. surged Wednesday after the motorcycle maker announced plans to monetize part of its finance unit through selling a nearly 10% stake and more than $5 billion of retail loans.
KKR & Co. and Pacific Investment Management Co. will each buy 4.9% common-equity interests in Harley-Davidson Financial Services as well as retail loan receivables at a premium to face value, Harley-Davidson said in a statement. Bloomberg News reported Monday that advanced talks on a deal were occurring.
Shares rose 18% premarket to $27.12.
The finance announcement occurred alongside the release of Harley-Davidson’s second-quarter results, which showed a bigger-than-expected 28% slump in motorcycle shipments from a year earlier.
Harley-Davidson said it plans to use approximately $1.25 billion of cash unlocked through the transaction to reinvest in the company, while a $450 million debt reduction is planned along with about $500 million of returns to shareholders.
The partnership will “create a long-term stable funding mechanism” for HDFS without impacting service to customers and dealers, Harley-Davidson Chief Executive Officer Jochen Zeitz said in the statement. Harley-Davidson will retain control of the unit.
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