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.
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.