New Wave of Ducati Divestiture Talks Emerge

04/26/2017 @ 5:14 pm, by Jensen Beeler26 COMMENTS

We have been here before, with financial news outlets discussing the possibility of Volkswagen divesting Ducati Motor Holding from its collection of companies. Let’s be clear, this talk about talk…not talk about action.

The idea of VW selling Ducati isn’t new. We first reported on this rumor back in September 2015 – when VW was found fudging around with its diesel-powered cars. Many thought the ramifications of Dieselgate would mean a bevy of brands being unload by the German car company. Nothing came of that.

Then last year, around June 2016, more talk of Ducati’s divestiture came to the forefront. The rumors were so strong, that Audi AG (the direct owner of Ducati) had to publicly state that the Italian motorcycle brand wasn’t for sale.

So here we are today, again with reports that the highest levels of Volkswagen are considering looking into selling their little motorcycle brand.

According to a report on Reuters, Volkswagen has retained the investment banking firm Evercore to evaluate the possible options for the German automaker, including the sale of Ducati.

There are a lot of qualifiers in that sentence, and it is important to understand that holding reviews aren’t particularly anything noteworthy at this level of business. It’s easy to have smoke and no fire.

It is also important to know that Ducati is a positive asset for Volkswagen, estimated at bringing in about €100 million each year in earnings (EBITDA). On the market, Ducati could be worth up to 15x that figure, which could be a tidy profit for VW, on its short ownership of the Italian motorcycle maker.

Another important point to consider is that Volkswagen is in a much better position now than it was a year ago. The company is still down a significant amount in its stock trading price (roughly 60%) pre-Dieselgate, but VW is slowly clawing back market value, up roughly 50% over its low-point just a year and a half ago.

What does this all mean? There are two reasons for Volkswagen to retain the services of Evercore in this situation. The first one is that Volkswagen believes it can make over €100 million a year by investing €1.5 billion or so into another project.

This would be similar to the thinking that saw Polaris shutdown Victory, to focus resources on the growing Indian brand.

The second reason, and the one we are more inclined to believe is that VW has retained Evercore to find the fair-market value of Ducati, in order to reflect its increased value on its books.

This would allow Volkswagen to secure outside funding (i.e. bank loans) at more competitive rates and for higher values.

To provide counterpoint though, the most interesting line from the Reuters story is the statement that VW might consider offering Ducati on a public stock exchange – another possible sign that Volkswagen AG is looking to raise some quick money.

It will be interesting to see where this next round of rumors takes us with this Italian brand and its German owners. Stay tuned.

Source: Reuters

  • Jd

    Thats a nice pic.

  • David Booth

    Who the fuck thinks Ducati is worth 15 times EBITDA? Seriously, do you make this out of complete air? Just cause Reuters says it’s so. Come one. Use your freaking noggins on this and don’t print such rubbish.

  • Peter-punk

    What would you do: Sell it or retain it?
    Is it safe to say that (from the pure biker view) the brightest Ducati era was when the company was in full “Italian” hands?
    I own several Ducatis, and I barely recognize the todays brand compared to my bikes (916, 998, MHe, Sportclassic Monoposto) so maybe I’ll prefeer drinking Italian coffe from an italian machine than drinking Italian cofee from a German one.

  • Superlight

    I. too, have owned several of the older Ducatis, but I see the brand alive and well with their current lineup.

  • Al Putra

    that’s why I prefer the japanese sushi made by japanese cook ;)

  • Alclab

    I’m glad you talked about this topic Jensen, when the news started to appear on my feeds it seemed like a wrong interpretation and overreaction.

    Personally I think Audi (or VW) has done a fantastic job with the brand. Their market share, record sales, brand management and involvement, as well as R&D (and racing money) has made it (in my perspective at least) one of the healthiest periods of time for Ducati.

    Hell, I even bought one knowing that some German engineering might make it’s way to production and increase the one problem pretty much all Italian factories have, which is reliability.

    So I’m hoping we see this state of affairs continue. I’m sure many other people may think it’s impure or just not agree, but that’s just my two cents.

  • Keith

    I’m curious to know what happens to patent/proprietary information when something like this happens: Could for example, VW retain the ability to use the desmo VVT system in their cars, or do they have to give up that when they sell?

  • Bruce Steever

    The desmo system makes less than zero sense in a car, and the VVT system on the Multistrada is miles behind the tech found on nearly any modern car.

  • AHA

    I’m sure they could sell on to Herr Pierer again. Who knows, he may front up 2 or maybe even 3 euros this time. :)

  • What earnings multiple did Audi pay?

  • Thanks. I’ve been working on my Photoshop game.

  • Vladimir Pushkin

    The real question here is, who pays Lorenzo’s contract?

  • halfkidding

    Stocks are worth what people are willing to pay for them. Earnings, profits real or imagined, sales, don’t mean a thing. Amazon has arguably never made a dime in real cash flow profits and Tesla never will and together they are worth what, $300Bn? Are they ‘worth’ it. Until their stocks fall they are.

    In general stocks should continue to do well long term because central banks are going to print tens of trillions more and then hundreds of trillions more to keep financial asset prices inflated.

  • JSTNCOL

    The Sport Classic was produced while Ducati was in the hands of Texans… wasn’t it?

  • Brett Lewis

    I believe that’s the type of thing that’s open for negotiation, but perhaps Ducati could license whatever technology Volkswagen wanted before the sale… Might depend on how much autonomy Ducati currently has…

  • paulus

    VW Share price increased 4 points over 5 days…. I wonder if this is because of the news ;-)

  • paulus

    It was at the direct request of the US market… and it sold ‘less than anticipated’ units.

  • paulus

    …. we do! In every Ducati bought.

  • Superlight

    The desmo system would make sense in a performance car as a point of product differentiation, especially if it could be shown to increase power.

  • Bruce Steever

    You like pulling the head cover on your car every 15k, eh?

    And If we assume that that a longer service interval version was created for cars, it would be so different from the motorcycle system that Ducati’s patents wouldn’t even apply. Point: moot.

  • Superlight

    Perhaps. If the desmo system could show definitive power increases much of the maintenance issues could be forgiven. Also, the maintenance intervals would likely be much longer for an automotive application, as they don’t rev nearly as high as motorcycles.

  • Alclab

    LOL! So True!! Frickin’ J-Lo better start bringing in results!

  • Bruce Steever

    The potential timing and cam curve advantages of a desmo system are not magic, and again, compared to car tech, are primitive AF.

    Remember, this whole thing started simply as a way to get around crummy metallurgy. Ducati simply stuck with the system out of marketing and inertia.

  • Superlight

    No, desmo valve actuation is not magic, but it is different, which is nice to have in the ever-crowded world of performance cars. The key is proving it really offers a real advantage in power versus conventional valve springs.

  • Bruce Steever

    That’s where it all falls down – it really doesn’t offer significant benefits. When you bring car tech into the discussion – with double cam independent timing and throttle-less engines and all that – the cost/benefit ratio falls off a cliff.

    At ultra-high revs – like in MotoGP – desmo systems still make sense. But the only reason you see desmo systems on bikes like the Monster or Scrambler is due to momentum.

    The wiki article is actually pretty good here: https://en.wikipedia.org/wiki/Desmodromic_valve

  • Singletrack

    Ya, and it makes it look like US dollars will be circulating around Ducati (again?). Raises some interesting questions.