Harley-Davidson (NYSE:HOG) is Considering a Takeover Bid for Ducati

Motorcycle maker Harley Davidson (N: HOG) may be joining the race to acquire its Italian rival Ducati. A merger of the two companies would bring together two of the most famous brands in the motorcycle industry in a deal that could be worth $1.67 billion.

Harley-Davidson isn’t the only company considering a takeover bid for Ducati. India-based Bajaj Auto (NS: BAJA) and other buyout funds are also lining up bids.

U.S.-based Harley Davidson is working with Goldman Sachs (NYSE: GS) to draft the deal, according to sources familiar with the matter.

Tentative bids are likely to be made this month.

Ducati Has Multiple Options

 

Ducati, which is controlled by Volkswagen’s Audi division is working with Evercore, an investment boutique, on the sale. The sale would help fund Volkswagen’s strategic overhaul after its devastating emissions scandal.

Volkswagen is looking to gain between 1.4 billion and 1.5 billion euros from the bids.

The private equity funds Bain Capital, KKR (N: KKR) and Permira are also pursuing Ducati

Ducati has been in business since 1921, and started out making radio components and vacuum tubes.

Harley-Davidson, founded in Milwaukee, currently holds half of the U.S. market and was one of the only motorcycle manufacturers to survive the great depression.

But the company’s stock has suffered, as sales dwindle amidst lower demand. As the baby boomer generation ages, younger rides are opting for cheaper brands, like Honda and Polaris.

Deja Vu

 

The potential acquisition is the second time that Harley-Davidson is attempting a merger with an Italian rival. In 2008, it bought MV Agusta in a deal valued at $109 million.

Less than two years after the acquisition, Harley-Davidson essentially paid its original owners to buy back the brand. Sales never gained traction, so the motorcycle maker let the brand go.

Analysts speculate that Harley-Davidson may see history repeat itself if it wins the bid for Ducati. Focusing on its brand, they say, is what works.

In early June, Harley-Davidson was also under fire after a recall of more than 45,000 touring bikes. The recall was triggered by an oil clamp issue, which caused at least two crashes and nine incidents.

Motorcycle accidents, which cause more than 4,000 deaths per year, can be more deadly when malfunctioning parts are involved. Malfunctioning oil clamps can cause the bike to spit hot engine oil in front of the rear tire.

The malfunctioning clamps, according to Motorcycle.com, affect models produced between July 2, 2016 and May 9, 2017.

The oil clamp issue was first detected in March when a dealership had a Harley-Davidson motorcycle running on a dynamometer. A formal investigation was then opened by the company.

Harley Davidson was also under fire last year after the National Highway Traffic Safety Administration (NHTSA) investigated 430,000 motorcycles with anti-lock braking systems. The investigation came after three crash reports and 43 complaints with two injuries.

The investigation concluded that riders who claimed to have brake failure neglected to change their brake fluid every two years as recommended by Harley-Davidson.

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Ben Myers

After a long career in Finance which included HSBC and Bank of Ireland, Ben is now a popular commentator on the financial markets. A regular featured writer for dialyforex.com, investing.com, keyinvesting.com amongst others, Ben remains a keen trader of Forex and Binary Options.