Harley-Davidson said to be eyeing Ducati acquisition
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London: US motorcycle maker Harley-Davidson Inc. is lining up a takeover bid for Italian rival Ducati, potentially bringing together two of the most famous names in motorcycling in a deal that could be worth up to €1.5 billion ($1.67 billion), people aware of the matter told Reuters.
Indian motorcycle maker Bajaj Auto and several buyout funds are also preparing bids for Ducati, which is being put up for sale by German carmaker Volkswagen.
Earlier reports mentioned that Royal Enfield of Eicher Motors Ltd were also in the fray for Ducati acquisition, while Hero MotoCorp Ltd has stepped aside.
A deal with Harley-Davidson would bring together the maker of touring bikes like the Electra Glide that are symbolic of America with a leading European maker whose high-performance bikes have a distinguished racing heritage.
Milwaukee-based Harley-Davidson has hired Goldman Sachs to work on the deal, one source familiar with the matter said, adding tentative bids are expected in July.
Volkswagen, whose Audi division controls Ducati – maker of the iconic Monster motorbike – is working with investment boutique Evercore on the sale which will help it fund a strategic overhaul following its emissions scandal.
Based in the northern Italian city of Bologna, Ducati is on the wish list of private equity funds KKR, Bain Capital and Permira, which are all working on the deal, said the sources who declined to be identified as the process is private.
Ducati was launched in 1926 as a maker of vacuum tubes and radio components and its Bologna factory remained open in World War Two despite being the target of several bombings.
Ducati racers have won the Superbike world championship 14 times, with Carl Fogarty and Troy Bayliss its most successful riders.
Harley-Davidson, which commands about half the US big-bike market, was founded in Milwaukee, Wisconsin, at the start of the last century and was one of two major American motorcycle manufacturers to survive the great depression.
Demand for Harley’s motorcycles continues to be slow as its loyal baby boomer demographic ages and rivals such as the Indian brand bike maker Polaris Industries Inc and Japan’s Honda Motor Co. Ltd offer discounts.
Evercore has sent out information packages to a number of potential suitors including Ducati’s previous owner Investindustrial, sources with knowledge of the matter said.
Investindustrial bought a stake in Ducati before the financial crisis, subsequently taking control of the business before selling it to Audi in 2012.
It is now looking to compete with heavyweight private equity firms and large industry players to regain control.
Volkswagen, Audi, Harley-Davidson, KKR and Bain Capital declined to comment while Bajaj, Investindustrial and Permira were not immediately available.
Volkswagen, Europe’s largest carmaker, is seeking to move beyond an emissions-cheating scandal that has tarnished its image and left it facing billions of euros in fines and settlements.
A successful deal for Ducati, which last year made revenues of €593 million euros, would show that Volkswagen boss Matthias Mueller is serious about reversing his predecessor’s quest for size.
Volkswagen said last June it would review its portfolio of assets and brands, rekindling speculation among analysts that “non-core” businesses could be put up for sale.
Volkswagen hopes to raise between €1.4 and 1.5 billion from the sale of Ducati, valuing it at 14-15 times its earnings before interest, taxes, depreciation and amortisation (EBITDA) of about €100 million, the sources said.
The German car maker wants a valuation that reflects trading multiples of similar trophy assets in the automotive industry such as Italian car maker Ferrari which trades at almost 30 times its forward earnings.
Yet it may need to compromise on price as some of the bidders would struggle to pay as much as €1.5 billion for Ducati, several sources said.
Price expectations have already proved challenging for some industry players who recently decided against bidding.
Indian motorcycle firm Hero MotoCorp and its rival TVS Motor Company initially expressed interest in Ducati but were put off by its price tag and decided to walk away, the sources said.
German car marker BMW and Japanese motorcycle makers Honda and Suzuki have also decided against bidding for Ducati, sources close to the companies told Reuters.
A BMW spokesman confirmed the German firm is not interested in Ducati while Hero and TVS were not immediately available for comment.
Another source close to Volkswagen said the sale of Ducati may not be finalised before the annual EICMA motorcycle show in Milan in mid-November as Volkswagen wants to find the right buyer and the sales process may take time.