The big non-racing news today is that Ducati is reportedly up for sale, with a price tag of €1 billion. To be honest, I’m fairly amused by how many emails I found in my inbox on this topic, and by how far this news item is spreading in the motorcycle news sector today. The buzz of course is that Ducati may be purchased by any number of large manufacturing firms, with smart money on a European automaker.
Either asleep at the switch for the past year, or just grossly inept at understanding financial news (guys, there is a big difference between one billion euros and one billion pounds), collectively the motorcycle news industry is reporting on an story that we first published nine months ago like it is a shot out of the dark.
For those that missed our ongoing coverage of the topic, Investindustrial actively spent the better part of 2011 looking to divest its majority position in Ducati Motor Holdings, and was in serious talks with Mercedes-Benz over the acquisition. Our Bothan Spies told us back in April that Investindustrial was very eager to sell Ducati to Mercedes-Benz, while the zie Germans were being very, well German about the whole thing.
With nothing coming to fruition on the Mercedes deal, Ducati again made waves in August when it was reported that the company was interested in making a private stock offering in 2012. Today’s news of course is the logical extension of that announcement, as it is both 2012 and Investindustrial is rumored to be in talks with several possible private buyers for Ducati. While none of this news should surprise anyone, what is of note is the price tag being attached to Ducati is €1 billion.
If this all sounds like a bit of off-season speculation to you, then consider the following statement that comes straight from Andrea Bonomi, the Chairman of the Board at Investindustrial. “Ducati is now a perfect company but the further growth it requires needs the support of a world-class industrial partner,” Bonomi told the Financial Times. “This year, we will work towards that partner.”
If standard manufacturing revenue multiples are holding true to this situation, then this figure puts Ducati’s yearly revenues at over €900 million per year, a pretty tidy sum for an Italian motorcycle manufacturer that only puts out 40,000 units a year. There is no doubt that Ducati had a hallmark year in 2011, and surely Investindustrial is keen on cashing out while on top. Expecting to make nearly three times its investment back on the sale, Ducati is likely to be sold to an automobile manufacturer.
Despite being one of the strongest brands in the business, Ducati’s future is dependent on its ability to continue fueling growth at the boutique company. This will not only require a considerable amount of capital, though Ducati currently has an extremely low debt ratio (1.7x according to Financial Times), it will also need a partner/buyer that knows how to scale industrial tooling and an international manufacturing business.
For an automaker, Ducati is a lucrative purchase, as the EU continues to crack down on carbon dioxide emissions from vehicles on a company-wide basis. With motorcycles being the loophole on that mandate, a company like Mercedes-Benz could have offset the carbon emissions from its larger and sportier cars with the figures from Ducati’s motorcycles. While Mercedes-Benz no longer has its hat in Ducati’s ring, Financial Times is reporting that BMW, Volkswagen, and Mahindra have been rumored to be talking to Investindustrial about a possible acquisition.
Expect to see this story develop further over the course of 2012, and also expect to see what is respectfully called “motorcycle journalism” stumble along through the bigger words of financial and business reporting.
Source: The Financial Times (Google Cache)
Great reporting.
I think your estimated multiple is off for a high growth MFG with a very strong brand. I’d expect a 2X to 3X revenue multiple on the valuation which would put revenues at ~€400 million per year. Triangulating bottom up, for 40,000 units sold at wholesale that seems more appropriate.
Now you’re talking like those TPG guys Marc.
There goes the potential sales figures for 2012!
An genius brought a apartment in Moscow for the same price … :))))
Think they,d take a cheque?Cause it will fill out my portfolio nicely.Next to Park lane and Mayfair.
Marc, I wouldn’t be surprised if Ducati made as much off of jackets and shirts and “lifestyle” products at near 100% profit as they do selling bikes. They’re the Harley Davidson of sport bike companies. Double your revenue estimate wouldn’t surprise me in the least.
As to a buyer developing the manufacturing process a bit more, I really hope this happens. If Ducati design/performance could be combined with detail engineering, better fit and finish, and an international parts network, it would really be a killer package.
To add fuel to the debate, H-D makes only about 10% of its revenue off t-shirts. Remember it takes a lot of $10 tank-tops to equal one $20,000 motorcycle.
Is that just t-shirts, or does that include dog bowl, do-rags, brand licensing, and co-branding exercises (H-D F-150, for example)?
Even if so, 10% is a hell of a big chunk in lifestyle crap.