Harley-Davidson Preparing Bid to Buy Ducati But Why?

Aside from their penchant for powerful twin-cylinder engines, Harley-Davidson and Ducati couldn’t have less in common…so why is Harley-Davidson reportedly trying to buy the high-performance Italian sport bike maker? We have a few theories why.

Earlier this week, Reuters reported that American cruiser manufacturing giant Harley-Davidson is preparing a bid to buy Ducati, currently owned by Audi and part of the Volkswagen Group. The announcement came as a surprise to many, partially because Harley-Davidson and Ducati couldn’t be more different – aside from a penchant for powerful twin-cylinder engines and some of the fiercest brand loyalty in the motorcycle industry, the Motor Company has virtually no shared interests with the Italian company known for high-end, powerful sport motorcycles with a rich racing heritage.

The German automaker has announced it’s intention to sell the Italian motorcycle manufacturer earlier this year, part of its massive divestment efforts following mounting costs and an unprecedented $2.8 billion fine levied by a U.S. federal court as part of the “Dieselgate” scandal that began in 2015. Volkswagen Group is being pressed to unload assets to pay for the billions of dollars in costs and fines associated with the scandal, and despite the huge recent success of the Ducati brand, the automaker has hired investment banking form Evercore to handle its sale to allow VW to liquidate assets and return to its core as it recovers.

But because Ducati is going very strong as a brand, it will not come cheap to it’s new buyer – industry sources say that Ducati may be a bit pricey, as VW wants a price that reflects an unusually high 14-15 times earnings. Numerous potential buyer’s have already walked away from the deal, such as Indian motorcycle giant Hero MotoCorp, TVS Motor Company, BMW, Honda and Suzuki. But Ducati is a very high-end brand with a strong heritage and passionate customer base, and should command a premium for its prestige – in fact, some call Ducati the “Ferrari of the motorcycle world,” and Ferrari is valued at a whopping 30 times earnings, a result of the incredible exclusivity the brand cultivates.

But while sticker shock has scared off many of the heavy hitters in the motorcycle world, it is surprising that Harley-Davidson would be making an offer, which Reuters reports it has hired Goldman Sachs to prepare – an offer that sources say could total up to 1.5 billon Euro ($1.67 billion US.) However, looking a bit closer at the potential acquisition as part of a wider strategy, a few reasons for the deal emerge.

For one, Harley-Davidson, despite commanding fully half of the heavyweight motorcycle market in the U.S. on it’s own, has struggled in recent years to diversify it’s product line to recruit younger riders while still retaining the religious loyalty of it’s core customers. Buying Ducati might relieve the Motor Company of expanding its product line to appeal to new customers and risk diluting its brand, as Ducati is a brand that already achieves that.

It could also be a pre-emptive play against the rapid rise of Polaris-owned Indian, which has had huge commercial success with its sporty compact cruiser, the Scout. Harley-Davidson has failed to field an affordable, performance-oriented smaller bike that would rival the Scout, but Ducati’s Scrambler would pose more of a threat to Indian’s growth than H-D’s Sportster or Street models.

Alternatively , it could simply be a good investment. Ducati has been firing on all cylinders in recent years, with excellent performance in the global marketplace, driven by double-digit growth in emerging markets and the colossal success of its Scrambler line. Ducati may be a gem caught in a fire sale by VW, which needs desperately to regroup to recover both revenue and it’s reputation – but it’s a gem only a few well-heeled buyers can afford, and Harley-Davidson happens to be one of them. While the motorcycles couldn’t be more different, the two brands do share some fundamental similarities – a high level of prestige and strong brand loyalty, and it certainly wouldn’t look bad for Harley-Davidson to have Ducati in it’s portfolio.

However, this isn’t the Motor Company’s first attempt at acquiring an prestigious Italian motorcycle maker. Many remember it’s acquisition in 2008 of MV Agusta for $109 million – and then it’s shocking move to sell the company back to it’s previous owners for a token amount, essentially giving it back just to unload it after failed marketing attempts and the Great Recession took a toll on its value.

Harley-Davidson has likely learned from its MV Agusta mistake, but regardless, many observers don’t like the prospect of H-D buying Ducati – especially because Ducati is already doing so well on it’s own.

The brand’s huge success in recent years will likely only be interrupted by the ownership change, and the ultimate fear of Ducati fans is that Harley-Davidson will loot the brand’s engineering and design talent to boost it’s own brand, rather than building it up more on it’s own.

But no matter who acquires Ducati, industry analysts and Ducati riders alike seem to be echoing the same opinion – that Ducati is doing so well already, that the very best thing a new owner could do with Ducati is simply: leave it alone!