Harley Buying Italian Motorcycle Maker

Harley Davidson (HOG) is expanding its footprint overseas. With International sales increasing 16%-20% even in the current environment, the move makes perfect sense.

Harley-Davidson, Inc. (HOG) today announced the signing of a definitive agreement to purchase the Italian motorcycle maker MV Agusta Group (MVAG). Under the agreement, Harley-Davidson will acquire 100 percent of MV Agusta Group shares for total consideration of approximately 70 million euros ($109 million), which includes the satisfaction of existing bank debt for approximately 45 million euros ($70 million). In addition, the agreement provides for a contingent payment to Claudio Castiglioni in 2016, if certain financial targets are met. MV Agusta Group is privately held, with the Castiglioni family owning 95 percent of MVAG shares.

The acquisition is expected to close in several weeks, pending the satisfaction of contingencies and receipt of regulatory approvals. Harley-Davidson intends to fund the transaction primarily through euro-denominated debt.

MV Agusta Group has two families of motorcycles: a line of exclusive, premium, high-performance sport motorcycles sold under the MV Agusta brand; and a line of lightweight motorcycles sold under the Cagiva brand. MV Agusta’s F4-R motorcycle, powered by a 1078cc in-line four-cylinder liquid cooled engine, is rated at 190 hp. The company sells its products through about 500 dealers worldwide, the vast majority of them in Europe. In 2007, MVAG shipped 5,819 motorcycles. During 2008 MVAG has significantly slowed production due to financial difficulties.

“Motorcycles are the heart, soul and passion of Harley-Davidson, Buell and MV Agusta,” said Harley-Davidson, Inc. Chief Executive Officer Jim Ziemer. “Both have great products and close connections with incredibly devoted customers. The MV Agusta and Cagiva brands are well-known and highly regarded in Europe. They are synonymous with beautiful, premium, Italian performance motorcycles,” Ziemer said.

Harley-Davidson, Inc. plans to continue to operate MV Agusta Group from its headquarters based in Varese, Italy. Following closing, the first priority will be to appoint a leadership team to include a new Managing Director and to resume the manufacture of current models."

Full release



Disclosure: Long HOG

 

Comments

[Hanoch:]

The "move makes perfect sense"? The vast majority of corporate acquisitions end up damaging shareholder value. In this case, my understanding is MV Agusta operates in the red, i.e., it doesn't make any money. Further, if HOG wants to expand is overseas "footprint", why not do it with its own brand?

2008 Jul 13 12:13 AM

[Old Trader:]

Hanoch,

My guess is that HOG wanted to add another iconic brand to its portfolio. Although HOG is growing their sales overseas, the type of bikes Harley is noted for comprise a small segment of the overseas markets, given that most Europeans prefer their bikes to have more of a "sporting" pedigree. I'm guessing (don't know for a fact), that their "sports" brand (Buell) is regarded as more of an "oddity", than a true contender.

oldtrader

2008 Jul 13 01:17 PM

[mallarde:]

I think Todd should compete on ESPN 2 in the national cheerleader competition. Great analysis.

Do we think Todd's prediction months ago of people flocking to buy $20K motorcycles to save gas has come true?

What are Seeking Alpha's criteria -- if there are any -- for letting people publish their articles?

2008 Jul 14 05:18 PM

[FUJIMO:]

So in your estimation would you say that Todds judgement in HOG overview is more off or mor on.


On Jul 14 05:18 PM Mallarde wrote:

> I think Todd should compete on ESPN 2 in the national cheerleader
> competition. Great analysis.
>
> Do we think Todd's prediction months ago of people flocking to buy
> $20K motorcycles to save gas has come true?
>
> What are Seeking Alpha's criteria -- if there are any -- for letting
> people publish their articles?

2008 Jul 15 11:35 AM

[mallarde:]

Hee hee. Just buy another piece of chrome to bolt onto your Hog, and everything will be OK.


On Jul 15 11:35 AM FUJIMO wrote:

> So in your estimation would you say that Todds judgement in HOG overview
> is more off or mor on.
>
>
> On Jul 14 05:18 PM Mallarde wrote:
>
> > I think Todd should compete on ESPN 2 in the national cheerleader

>
> > competition. Great analysis.
> >
> > Do we think Todd's prediction months ago of people flocking to
> buy
> > $20K motorcycles to save gas has come true?
> >
> > What are Seeking Alpha's criteria -- if there are any -- for letting

2008 Jul 15 12:58 PM