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VW 'takes diversion' with reported Ducati pursuit

by Andrew Bulkeley in Berlin | Published March 13, 2012 at 10:07 AM

An acquisition of Italian motorcycle maker Ducati Motor Holding SpA would add yet another high-profile name to the stables of Volkswagen AG but do little for its ambition to become the world's biggest car manufacturer by 2018, analysts warn.

Volkswagen's Audi AG luxury unit has entered exclusive talks to buy Ducati from Italian private equity shop Investindustrial Holdings SA for up to €500 million ($655 million) in cash and debt, according to U.K. magazine Car.

The acquisition of a high-profile European brand would be nothing new for VW and supervisory board chairman Ferdinand Piech, the Porsche heir who has expanded the company to nine brands. Under Piech, the company has driven off with sports car maker Lamborghini and ultra-luxury sedan makers Bentley and Bugatti. It's also made several overtures to Fiat SpA for its Alfa Romeo luxury brand.

"It would allow them to sell everything from two-wheelers to massive trucks but it's a useless game that would distract the board from more important issues," said Frank Schwope, an analyst with Norddeutsche Landesbank in Hanover.

Piech has developed an acquisitive taste as part of a strategy to create just such a varied vehicle maker. However, for Audi, Ducati would be a return to its roots - Audi was formerly known as NSU, which was at one time also well-known for producing its own line of motorbikes.

An Investindustrial spokesman refused to comment on the reports other than to confirm Ducati has €200 million in debt, down from earlier reports of up to €800 million. The financial investor took Ducati private in 2008, including the acquisition of a 30% interest from TPG Capital.

At the time, Ducati was teetering on bankruptcy and VW's Piech later publicly bemoaned not scooping up the motorcycle maker at a discount. The motorcycle maker now produces 40,000 two-wheelers per year but reportedly remains unprofitable.

Neither Audi nor VW returned calls seeking comment.

Speculation about a Ducati sale first emerged in February when Investindustrial began mulling either a Hong Kong listing or an auction for the company, according to Bloomberg.

India's Hero MotorCorp Ltd. has also confirmed interest in Ducati as Indian carmakers look abroad for technology and expertise as well as new markets for their own vehicles. And Germany's Daimler AG may also be interested, based on a two-year-old marketing partnership with Daimler's performance-modification unit AMG.

Munich's Bayerische Motoren Werke AG, or BMW, is the only German carmaker with a motorcycle division. It's already said it's not interested in adding the Italian brand to its Berlin motorcycle operation.

Should VW speed off with Ducati, the deal could push its integration plate to overflowing. The company is still working to digest the recent acquisition of Munich truckmaker MAN SE, which is being integrated into its majority interest in Sweden's Scania AB.

And the Wolfsburg, Germany-based carmaker is struggling to complete its Porsche acquisition. This week the company said it expected to provide an update in the first half after it completes talks with tax authorities. It has options to buy the 51% of Porsche it doesn't already own but exercising the options before 2015 would trigger a tax bill of up to €1 billion ($1.3 billion).

Shareholder lawsuits over an unsuccessful offer for VW by Porsche in 2008 have also hampered the deal, which isn't expected to close this year.

VW CEO Martin Winterkorn refused to comment on any potential Ducati offer during the company's Monday annual meeting but admitted the company keeps its eyes open when assets come up for sale.

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Tags: Ducati Motor Holding SpA | M&A | Porsche | Volkswagen AG

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VW 'takes diversion' with reported Ducati pursuit

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