(Repeats with new headline)
* Ducati's liabilities well below 200 mln euros -source
* Analysts criticise deal as unnecessary sideshow
* Audi, Investindustrial may withhold exact price -source
By Andreas Cremer and Christiaan Hetzner
BERLIN/FRANKFURT, April 17 Volkswagen's
Audi unit has agreed to buy thoroughbred Italian
motorcycle maker Ducati for about 860 million euros ($1.12
billion) including debt, two people familiar with the matter
told Reuters on Tuesday.
The deal allows VW chairman Ferdinand Piech, who has long
coveted Ducati and himself owns one of their superbikes, to make
up for a missed opportunity nearly 30 years ago to buy the maker
of the fire-engine red 1199 Panigale, which boasts "the most
powerful twin-cylinder production engine on the planet".
One source said Ducati's debt was well below 200 million
euros in an acquisition analysts said lacked obvious benefits
for premium carmaker Audi and did little but polish Piech's
reputation as a collector of rare and exotic brands.
"The Ducati purchase is driven by VW's passion for
nameplates rather than industrial or financial logic," said
Arndt Ellinghorst, analyst at London-based Credit Suisse.
"It's an unnecessary sideshow to VW's main challenges of
integrating sports-car maker Porsche and merging
truck operations at MAN and Scania."
Ducati, which has won 13 rider's Superbike World
Championships since 1988, will increase the VW group's brand
portfolio to 12 and extend Audi's long-standing rivalry with
Bayerische Motoren Werke to superbikes. It was Piech
who piloted VW's expansion to an 11-brand entity covering
fuel-efficient city cars to 40-tonne trucks.
"The purchase does have a trophy feel to it, in the sense of
something you might mount up on the wall next to the stag you
shot last year," said an auto industry analyst, who himself
drives a Yamaha R1 superbike.
When exclusive Italian superbike rival MV Agusta was put on
the block late in 2009 by a Harley Davidson desperate to
sell, Piech told Reuters he only had eyes for Ducati.
"I would still like a small, valuable motorcycle
manufacturer," Piech revealed in an interview with a German
magazine from April 2008, complaining that he should have jumped
at the chance to buy Ducati in 1985 when it cost "peanuts".
Audi and Investindustrial may agree to withhold the exact
purchasing price in the statement, which they plan to publish on
the eve of VW's annual shareholders' meeting in Hamburg, one of
the sources said.
DROP IN THE BUCKET
Outgoing owner Investindustrial last listed Ducati's
earnings before interest, tax, depreciation and amortisation
(EBITDA) at 71 million euros for 2010, on revenue just above 390
million - a drop in the bucket for Germany's most profitable
Ducati makes about 40,000 two-wheelers a year across its
range of cruiser, supermoto, adventure, naked and superbikes
that include the muscular Diavel and dual sport Hypermotard. By
comparison, industry leader Honda sold over 16 million
motorcycles last year.
Demand for large sportbikes has contracted sharply following
the financial crisis, with hobby riders less willing to shell
out perhaps 10,000 euros or more for an expensive toy.
"The market halved since 2008 and still shows no real sign
of recovering," said Rudy Probst, a spokesman for BMW's own
Motorbike technology has only a very limited crossover to
car manufacture, so Audi is unlikely to see any direct benefit,
and though technology transfers flow more often in the opposite
direction, there are cultural limitations.
Bike makers place much less emphasis on fuel efficiency and
lower emissions, the major trends in the car industry. Instead
sporty motorcycles are designed for extreme acceleration,
breakneck speed and tight cornering.
"Filling my bike used to cost 18 euros. Now it's 25, and if
it goes up to 35 euros, I'm still not going to care. My R1 takes
about three seconds to go from 0-100 kilometers an hour, all in
first gear. That's why I bought it," said the industry analyst.
Antilock brakes (ABS), which have been standard in all new
cars for years, are a prime example. Only in the last 18 months
Bosch launched the world's first ABS system designed
specifically for motorbikes, having previously only adapted them
from their popular version for cars.
"Integrating new technology into the engine of a motorcycle
is often a question of weight; it's easier for cars to add on a
few extra kilos than a motorbike, where handling would suffer,"
Probst said, adding variable valve timing was another
fuel-saving feature yet to be really embraced by motorbike
"Other aspects like traction control cannot simply be
adopted directly from their application for cars. Extra
expenditure must be spent to adapt it to the different physics
of having two wheels on the road as opposed to four," he said.
David Arnold in specialist sales at Credit Suisse doesn't
see the logic, either, but can't begrudge Volkswagen the luxury
of splashing out for Ducati, since it has such a strong track
record of reviving tarnished brands such as Lamborghini.
"VW would likely say that cylinder head design in the
motorcycle industry is much more advanced than in passenger
cars, a common argument, but that sounds a little bit far
fetched to me," he said.
Analysts say VW chose its luxury brand to buy the brand
since Audi can claim rival BMW also has a motorcycle business to
enhance its sporty image, thus lending the deal a figleaf of
Barclays Capital analyst Michael Tyndall, himself a
self-styled Ducatista, said the deal showed just how much VW's
17 billion euro pile of cash was burning a hole in its pocket.
It shelled out 6.63 billion for equity in dealership group
Porsche Holding Salzburg, truck maker MAN and still had 1.1
billion left over after its normal year-to-year investment
"Consider for a moment that Volkswagen's business generates
something close to 8 billion euros in free cash every year. The
company either has to find investments to enhance its return on
capital or it needs to return the extra cash to shareholders,"
($1 = 0.7656 euros)
(Editing by Helen Massy-Beresford and Will Waterman)