When 2 years ago Harley-Davidson bought Italian motorcycle maker MV Agusta for $109 million the US was already in a deep recession, Harley sales were sagging with a management extremely worried about its core baby-boomer customers getting older and losing their will to ride a motorcycle. MV Agusta was also in financial trouble.
Harley-Davidson never explained how this acquisition would help them acquire younger motorcycle enthusiasts. Was it an exchange of technology, an extension of the number of dealerships abroad, both? The only things we know is that the strategy didn’t work if even implemented. Then, in October 2009 new Harley President Keith Wandell announced his intention to sell MV Agusta as part of a new corporate strategy to focus resources on the Harley-Davidson brand. No potential buyers being found, Harley-Davidson announced on August 6, 2010 that the company “had concluded the sale of its subsidiary, MV Agusta, to Claudio Castiglioni and his wholly owned holding company, MV Agusta Motor Holding”, Castiglioni being the former owner of the Italian motorcycle maker.
Immediately I reported that it looked like Harley-Davidson gave back MV Agusta to its former owner and that Harley being a public company it would have to report to the SEC (Securities Exchange Commission) the terms of the transaction. As a matter of fact the Wall Street Journal just reported that the 8-K filing with the SEC shows that Harley essentially paid MV Agusta’s former owners to take it back. The financial newspaper explains the content of the filing showing 1- that Harley had previously wrote-down $162.6 million for the fair value of MV Agusta and began treating the unit as a discontinued operation after announcing its intention to sell it a year ago. 2- that Harley anticipates additional related losses from discontinued operations in the third quarter of 2010. 3- that Harley received “nominal consideration” from Cariglioni for the transaction. In a subsequent interview a Harley-Davidson spokesman said that the specific amount it received was $3 Euros.
I would have paid them 6 Euros.
All they had to was ask.
I agree with my namesake !
The Castiglioni family that I remember when in Italy were the best Meat packers / Sausage makers to be Known.
Some years back the Castigloni’s tried to do an international exchange for cheese but they wanted more for their product than it was worth, because they had so much debt hanging over their head.
By luck they were told that there was another company in Wisconsin that may be interested in their sausage and was willing to buy their debt and their meat.
As it turned out, the Wisconsin company knew very little about packing meat and were looking for someone to buy the company back, as it turned out the interest of the Castiglioni’s was revived for they knew more about packing da meat/sausage than anyone….and pack it, they did!
So, on this transaction Harley would have lost $162.6 million – $3 + an amount to be announced at the end of the year…Brilliant. How many miliion dollars the former Harley President received as retirement package?
You could have overbid Harley at 4 Euros, but it would cost you about 20 mllions a year to support MV Agusta. Reaon why buying MV Agusta was great stupidity and selling at 3 Euros was a smart decision to stop the bleeding. Castiglioni richer by $109 million dollars in 2 years for doing nothing. Superb deal.
Naw, H-D is smarter than all that-they probably sold it back on a land contract with 30% down. If Castiglioni doesn’t make good on the balance, Harley gets MV back AND gets to keep the 1Euro down payment 😉
It’s funny, if they were so concerned about the youth market and had millions to play with- I know the kids use to love Firebirds. Maybe they should’ve bought Pontiac instead of MV Agusta 🙂
They could try the same with Buell…
Sounds like the new President hates sport bikes.
I dont have an MBA but buying something and then selling it at a huge loss wont keep you in business very long,Oh now Wandells excuse will be”I didnt buy it and had to get rid of it”.Pleese Harley shareholders get rid of this guy.You need to hire the guys running Triumph,they seem they can do no wromg!!!!!
There has got to be more to this story than we are hearing. Even the great HD would not buy a company for 162 million that has no assets. There has got to be some assets somewere that are not being reflected in this deal. Probably Patents and trademarks and copywrites not to mention buildings and what company would buy a bike manufacture and not get the tooling such as frame tables and such.
If HD bought this company for 162 million and then sold it for 3 euro’s and did not keep anything then all the CEO’s should be fired at once. If this story is true in all parts then HD is in serious trouble and will soon be owned by some other company. But I would bet there is more to this story.
HD management are savy wheelers & dealers… better stick to selling coffee mugs & bandana’s.
All they have to do is introduce 6 new pieces of chrome and 6 new t-shirts and they have made their money back with the outrages prices they charge and look it’s all made in Indian with .50 cent per hour labor ..Cha Ching..Cha Ching…Cha Ching…
SSDD; David
Proton also bought MV Agusta in the mid Naughties for almost 100 million and sold it a year later for just 1 Euro to Castiligoni. Nothing much new going on here.
In both cases the price was just a token amount plus debts,, which in MV Agusta’s case runs well into many tens of millions of dollars borrowed at non favorable rates by a desperate HD in the middle of the financial crisis.
basically Castiligoni seems good and selling companies debt free and buying them back when the purchasers find out that servicing the money they borrowed to try and turn the company round will cost more than any profits that company will ever make.
so while 3 euro seems cheap, that wasn’t the sale price, the real price was more likely 3 euro plus ( estimated) $90,000,000 of outstanding loans, Companies like HD tend to sell on the expensive loans and keep the cheaper ones. Castaligoni has access to the resources to refinace the debt down to a sensible level.
Everyone knew the the MV purchase was an ambitious undertaking. I know a lot of the Ducati and triumph hipsters were talking about it with mixed responses, and it seems like this group would be the target market for the new mv stateside.
Nobody could really know what happened in the Harley boardroom when this thing was being worked out, but none of that really matters now. I can only hope that this influx of cash to the castiglioni family can help them come out with a new flagship superbike. One that is truly epic like the F4 was when it came out. Something sexy and overpriced that’s a good 5 years ahead of anything anybody else has.
A man can dream, can he not?
A 8-K filing doesn’t reveal everything, but we will know more through HD annual report.
Keith Wandell does the right thing. Saving money. Harley will survive.
The Italian Family did not buy the company back with debt. HD wrote off the debt beforehand so MV should come back to Italy with no debt,
HD probably gets a better deal thorough the tax write off of the debt than trying to support MV Augusta. Cashflow wise, they win instantly. Even at ten euros, this would have been a good move. It was a poor strategy to buy MV in the first place, but ego is what drives CEOs and nothing soothes the ego more than an acquisition.
sounds like they are still specializing in the “meat packin” bizness
It looks like HD actually paid the Castiglionis $20M to take it back –
“August 10, 2010 – (Motor Sports Newswire) – Motorcycle maker Harley-Davidson completed the sale of MV Agusta, its sport-bike business based in Varese, Italy. The company’s announcement didn’t include the sale price but its 8-K filing with the Securities and Exchange Commission revealed the company essentially paid MV Agusta’s former owners to take it back.
In the filing Harley said it “contributed 20 million Euros to MV as operating capital” that was put in escrow and is available to the buyer over a 12-month period.”
Continued –
I believe this sort of thing plus the killing off of Buell is what happens when lawyers and accounts run a MC company instead of MC people.
Lawyers and accountants….. building and selling motorcycles to other lawyers and accountants.
jack just summed up harley like i have never seen in fifteen years of the motorcycle business..i have never heard a more truthfull statement…simple yet elegant
Makes me think about the new group of leaders at HD now. They are all LEARNING how to ride. Many of them are retreads from GM/Pontiac (and we know how well they did with that). It use to be a team of passionate riders, now it is a group of posers trying to get as much $$ as they can. Take a look at the insider buying and selling that has been going on. All of them trying to cash in what they can… I sold my last Harley a week ago…maybe I will get a MV now!
A 1 CYCLES
Lifes fun is remembering.
Just remember the flat track days and grin.
There is and old saying a friend is the one who bails you out of jail.
A real friend is the one who sits beside you in jail and the two of you laugh and remember
It’s pretty obvious that during the last few years, HD has turned into a financial science project, with little focus on the actual product; It’s pretty much the same formula that GM pioneered in the 80’s- look for Wandell to join Roger Smith in the CEO hall of shame soon……
Hey Keith- exercise those options yet? Freaking genius……..
Yeah, I could think of thousands of smart assed comments myself but the bottom lines are these:
The latest product coming from Harley is retaining its high quality materials and designs. Some very nice variations in the Sportster lines, for example, with the 48 etc. These are, however, the result of work put in motion 3-5 years ago when the more seasoned group of re-founders were in charge. The products you see next year and the year after will show where the new management is heading. As long as Willie G. Davidson is driving the styling direction they will be fine.
The decisions to end Buell production, and end the MV experiment were not dictated by the current management staff as much as the current economic conditions. Harley-Davidson, like all other companies dealing with a bad economy had to concentrate on their core profit sectors to protect the long and short term viability of the company. With no one sure how deep the recession would go, or how long it would last, they were making decisions which, from todays perspective, may not have been the most prudent choices, but, were the safest things for them to do. To this day we know that letting Indian go under in the 50s was sheer idiocy. GM or Ford would have profitted greatly by saving and owning Indian. The millions of dollars of potential profit from those bikes was not knowable at the time, and gambling with millions of dollars needed for their own operations was not an option given the economics of the day. In reality, Indian probably would have been every bit the success story H-D has been for the last 30 years. As my grandmother used to say, hindsight is a bitch!
Say what you will, but, right now every major Japanese and British motorcycle company would LOVE to trade balance sheets with Harley.