Hero MotoCorp Eyes Purchasing Ducati? Erik Buell Racing?

03/05/2012 @ 3:22 pm, by Jensen Beeler7 COMMENTS

Hero MotoCorp Eyes Purchasing Ducati? Erik Buell Racing? hero motocorp logo 635x423

Two weeks and two separate rumors about Hero MotoCorp’s acquisition warpath. Last week the Indian motorcycle manufacturer was said to be eyeing a minority equity stake in Erik Buell Racing. Having already hired the American sport bike maker to help innovate on some of Hero’s upcoming small displacement machines, the two companies sweetened the deal with Hero becoming the title sponsor to EBR’s AMA Pro Superbike racing effort.

This week the spotlight shines on Ducati Motor Holding, which has quietly been for sale for almost a year now. Originally wooing an acquisition from Mercedes-Benz, the Italian motorcycle manufacturer has been linked to a variety of other companies, as well as a public offering on an Asian stock index. With our sources telling us that Ducati has been trimming the fat from its books in order to make its earnings more attractive, Hero MotoCorp is the latest potential buyer to enter the fray and to talk to bankers about a Ducati acquisition.

The important thing to remember about the this set of Hero/Ducati rumors is that the speculation is stemming from investment bankers themselves seeking out Hero MotoCorp as a potential buyer, which is substantially different from Hero courting the Italian firm with its wallet out. With over $1 billion in cash reserves, Hero MotoCorp is one of the few motorcycle manufacturers that could even consider an acquisition of Ducati, and still have the purchase make some sort of sense with the company’s business direction.

“Lots of people have been coming to us with Ducati: Not one banker but many bankers,” Hero MotoCorp Managing Director Pawan Munjal said to Bloomberg News. “We’re talking to a lot of people. Not just Ducati, whoever comes to us, we talk to them.”

Despite the fact that “professionals” of the moto-journalism world have already labeled Hero MotoCorp as having thrown its hat in Ducati’s ring, it’s far to early to say that Hero has more than a passing interest in Ducati. As any good businessman will tell you, one has to remain open to all possibilities. Hero MotoCorp’s involvement with bankers regarding Ducati should merely be seen as the Indian manufacturer assessing the state of the market, and the options available to it. With Investindustrial reportedly hoping for a €1 billion valuation of Ducati Motor Holding, Hero MotoCorp would be roughly a quarter billion euros short of the acquisition price at today’s market rate (again, “professional” motorcycle journalists can’t seem to keep their dollars, euros, and pounds sterling straight…sigh), creating the issue of how the largest Indian motorcycle brand would fully-fund such a transaction.

Slightly more credible than the Hero/Ducati rumors is the one pertaining to Hero MotoCorp acquiring a minority stake in Erik Buell Racing. One of the companies I’ve tipped as ripe for purchase in 2012, EBR has a serious growth problem if it doesn’t get outside of investment. One of the more peculiar things from EBR’s partnership with Hero is the seemingly one-sided nature of the deal, which traditionally would see some sort of investment take place by one of the parties.

It makes sense then that Pawan Munjal would tip the company’s interest in acquiring a portion of EBR in the future. “We have a flexible free-flowing pact with EBR, which would be developed into a equity partnership,” said Hero MotoCorp’s Munjal. From that statement, the deal reached between Erik Buell Racing and Hero MotoCorp would appear to be more involved and complex than originally thought, and I am sure that Buell is gauging the response to the idea of an Indian company investing in a manufacturer whose brand has centered around being “American” in every possible horrible way.

Source: Bloomberg & The Economic Times

Comment:

  1. Cpt.Slow says:

    Yup

  2. kyle says:

    Thx for the straight story. Best place on the web for moto news! More content please!

  3. Halfie 30 says:

    This whole thing is getting very complex. Here’s to hoping EBR gets a fair shake from Hero, and eventually “mass” produce some bikes!

  4. motogpdr says:

    The idea of an Indian company buying, or at least taking a significant stake in Erik’s “american motorcycle” company is ironic. Just another sign of the economic shift of the world from west to east.

  5. Westward says:

    The Buell dichotomy, American motorcycles, Indian owned. There is irony in that situation. But hey, if the shoe fits, and it’s the only one around, you may as well race in it..

    However, Hero buying Ducati, that is just wrong on so many levels, that means the diluting of the brand. It would be like Audi becoming Pontiac…

  6. WetMan says:

    Well I am no investment banker, but I don’t believe for a second that Ducati is worth 1 billion. I know that money is almost free for bankers nowadays, but even so it should make some sense to spend it.

    If I understand correctly the bosses of BMW and Volkswagen want to buy Ducati because they love the brand and own some Ducati’s themselves. I guess the stock holders of these companies should be happy that they don’t love their Gulfstreams more…

    If Hero wants to buy a classy Italian bike firm with a lot of technicial expertise they should have bought MV Augusta. A year ago it was for sale for 3 dollars… I am sure the Castiglioni’s would consider selling for 100 million or so now.

  7. conchop says:

    Buell, Ducati, Hero – all in one basket – depends on the price. IMHO all these bikes are just widgets in the eyes of money. In the eyes of bikers, it takes on a completely different complexion. Buell is the Bill Boeing of motorcycles. Ducati is the Ferrari of motorcycles. Hero is the basic transportation of the Indians. Bikers are generally loyal to their brands as my ancestors formed a bond with their horse.

    How do the captains of industry mix all this together for a sustainable, profitable, yet emotional business? Very carefully.

    What we have here are positive potentials on all levels. Brought together, this could bring about a new generation and mix of technically advanced motorcycles that can carve into all segments of the motor world. However, if squeezed the wrong way by steely eyed accountants, we could end up with overpriced junk.

    You have my blessings – but continue ever so carefully. If any of you step out of line, you will be burnt. If you get it right, then we will all sing your praises. If you choose to walk away, the world will go on without you. The tales of Ulysses should inspire!