VW mulls selling Ducati to increase cash coffers following Dieselgate scandal

Article by Christian A., on May 2, 2017

Motorcycle maker Ducati might soon find itself under a new owner. This comes as its current parent, the Volkswagen Group, is reportedly mulling selling the Italian company to obtain funds needed to finance unprecedented costs, like those related to the so-called Dieselgate scandal.

As reported by Reuters, citing two sources privy with the matter, Ducati’s sale is being considered as VW is embarking on a strategic overhaul following the Dieselgate scandal. VW has been trapped in billions of dollars of fines and taxes after the scandal. Likewise, the group is now shifting its focus to electric cars and new mobility services. These have prompted the German company to streamline its operations, with the effect of limiting spending across the group. For instance, the VW brand is cutting thousands of jobs to save more money and thus create more funds for its future projects.

Of course, VW is still looking for more options to acquire more funds. Thus, according to Reuters, it has tapped Evercore, an investment banking boutique, to evaluate more options – including the possible divestment of the Ducati brand. Bologna, Italy-based Ducati has been owned by German premium carmaker Audi, which is part of the VW Group, since 2012. However, there had been concerns that Audi’s acquisition of Ducati was just a reflection of the passion of former VW Chairman Ferdinand Piech for the biker maker’s vaunted expertise on design and light engines. In actuality, the acquisition – worth EUR860 million ($935 million) in 2012 – was seen to having no economic logic or even industrial reason. In fact, Ducati is considered as one of VW’s non-core businesses, so selling the Italian company wouldn’t hurt the group in the long term.

Sources have told Reuters that VW has already commenced approaching possible buyers for Ducati. However, they also noted that the group has yet to decide whether it would finally sell the brand or not. Should VW decides to sell Ducati, it may find potential interest from other motorcycle makers in China and India (Hero). Sources said the consortium that acquired Aston Martin in 2007 might be interested in Ducati. They noted that these groups are trophy buyers that are more interested in the Ducati brand that in the technology. Larger motorcycle makers like Honda, Kawasaki, Harley Davidson, Polaris and Suzuki could also be interested, as well as private equity groups.

One of Reuter’ sources remarked that Ducati could fetch a valuation of up to 15 times its core earnings. Since the company posted annual earnings before interest, taxes, depreciation and amortization (EBITDA) of around EUR100 million, Ducati could be valued at EUR1.5 billion. However, a banker close to the industry to Reuters that potential buyers might offer an earnings multiple of over 10.

Source: Reuters.com

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Topics: vw, audi, ducati, dieselgate

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