Harley Completes Sale of MV Agusta - Analyst Blog

Harley-Davidson Inc. (HOG) sold its Italy-based sports bike subsidiary, MV Agusta, back to its foremost owner, Claudio Castiglioni, and his wholly owned holding company, MV Agusta Motor Holding, effective August 6. Claudio Castiglioni served as MV Agusta’s chairman since Harley acquired the brand on July 11, 2008. The motorcycle maker has not disclosed the terms of the transaction.

MV Agusta has changed many hands before Harley acquired it for $109 million. In 2004, Malaysian carmaker, Proton, has purchased the brand for $94 million, which closed its ties with the brand a year later and sold it to GEVI SpA, a Genoa-based financing company, for a token euro excluding debt.

In October last year, Harley announced its intention to divest MV Agusta as part of its corporate strategy to focus solely on its Harley-Davidson brand. The company also revealed its plan to discontinue its another subsidiary, Buell Motorcycles, run by the ex-Harley-Davidson engineer, Erik Buell, as a part of the same strategy.

In the second quarter of the year, Harley showed more than a fourfold increase in profits to $139.3 million or 59 cents per share from $33.4 million or 14 cents per share a year ago. With this, the motorcycle maker also outperformed the Zacks Consensus Estimate of 42 cents per share during the quarter. Revenues from Motorcycles and Related Products were flat at $1.14 billion in the quarter.

Harley’s profit was attributable to its aggressive restructuring actions, incorporated in its business strategy. The actions included the new labor agreements at its facilities as well as discontinuation of its Buell product line and the divestment of its MV Agusta.

Revenues from Harley-Davidson motorcycles inched up 2.8% to $831.6 million due to marginally higher shipments. The motorcycle maker’s global shipments increased to 59,046 units from 58,179 units in the second quarter of 2009.

Despite the impressive results, we believe the company’s aging customer base and slow recovery in the markets, reflecting its sluggish worldwide retail sales, will continue to negatively affect the company. As a result, we continue to recommend the shares of the company as Zacks#3 Rank (Hold) in the short term (1–3 months) and Neutral in the long term (6+ months).