Eicher Motors close to acquiring Italian superbike Ducati for $1.8-2 billion, says report

Eicher Motors, makers of Royal Enfield Bullet motorbikes, is reportedly close to making a binding offer to acquire Italian superbikes Ducati for around $1.8 billion-$2 billion. The deal is being valued at 14-15 times Ducati’s earnings before interest, taxes, depreciation and amortisation (EBITDA) of about 100 million euro, The Economic Times report said.

The deal, if fructifies, will enable Siddhartha Lal-led company expand globally and get access to technology, the ET report said.

Volkswagen has already tasked investment banking boutique Evercore to evaluate possible options including a sale of the Ducati brand, which its Audi division acquired for about 860 million euros ($935 million) in 2012.

In 2016, Ducati sold 55,451 units, thereby clocking sales of 721 million euro. The Italian superbike company has 780 plus dealers across 90 countries.

In comparison, Royal Enfield sold 6.50 lakh units in FY17, and is currently the world’s most profitable motorcylce company with current market cap standing at Rs 87,223.50 crore, the ET report said.

Although, Eicher Motors is the only Asian company left in the fray in the ongoing auction for Ducati, there were potential suitors earlier with names like Harley Davidson, Bajaj Auto, Hero MotoCorp and Suzuki among other private equity players throwing their hat in the ring.

The auction process may face delays as Volkswagen’s German trade union has opposed the sale process arguing that Ducati’s business has little synergy with the rost of the core operations. The labour leaders account for half the seats on the 20-member board, the report says.

In May, Royal Enfield said it plans to invest Rs 800 crore during this fiscal on various activities including its upcoming manufacturing facility near Chennai and new product development.

“We will be investing Rs 800 crore in FY 2017-18 towards our upcoming manufacturing facility at Vallam Vadagal near Chennai, product development, two technical centres in the UK and India and towards market expansion,” Lal had said in a statement.

The new plant is expected to be operational by August 2017 taking the combined capacity of Royal Enfield to 8,25,000 motorcycles in 2017-18.

During the fourth quarter of the last fiscal, Royal Enfield posted its best ever performance, selling 178,345 motorcycles, up 20.8 percent over 147,618 motorcycles sold in the same period last year.

The two-wheeler maker also posted its highest ever quarterly income from operations at Rs 1,888 crore for the fourth quarter ended 31 March, a growth of 23.2 percent over the corresponding period last year.

Royal Enfield now has 25 exclusive stores in international markets.

With PTI inputs