Rumour: Harley-Davidson Could Soon Find a New Owner
Sameer Contractor
1 min read
Jul 10, 2016, 05:26 PM
Key Highlights
- Private equity firm KKR is reportedly interested in buying Harley
- The report led to Harley-Davidson's stock value spiking by 20%
- The takeover could result in major management changes at Harley
If rumours doing rounds in the US are to be believed, Harley-Davidson could soon find itself a new buyer with a hostile takeover being a possibility. Financial reports in the US have conveyed that private equity firm Kohlberg Kravis Roberts (KKR) is looking to buy the iconic American motorcycle manufacturer. While the news has not been confirmed by either of the company's involved, it did help Harley's stock value go higher by a good 20 per cent. That said, if true, the takeover will mean major changes for the bike maker not only in terms of management but its future business plans as well.
KKR has an expansive history in the financial sector and is one of the biggest private equity firms globally with $126 billion under just assets management. The firm has a reputation of conducting leveraged buyouts on vulnerable companies, and the recent rumours suggest that KKR is looking to buy Harley-Davidson's outstanding stock for $65 per share, a 35 per cent premium over the regular value. This will either result in the equity firm becoming the complete owner or the largest shareholder of the motorcycle company.
What does KKR gain from the acquisition, you ask? The entire point of a leveraged buyout is that the company acquiring feels that the company to be purchased is undervalued. The same depends on a number of factors like market conditions, poor leadership, capital gain, growth record among things. The acquiring company then will purchase the target firm, reboot its process and sell to another buyer or take it public. In either case, the former is targeting to make a profit out of its business decision and may even retain the company amidst the process.
Incidentally, this is not the first time rumours have risen about KKR buying out Harley-Davidson. Rumours were afloat back in 2010-11 as well, similar to the scenario today. This resulted in Harley's stock value soaring for a brief spell. While a buyout never happened, an investigation was conducted by the US Securities Exchange Commission for possible stock price manipulation.
Another factor that does not support the rumour is Harley-Davidson's current market standing. While the company may not be at the top of the sales chart in terms volumes, the bike maker is going bankrupt either. Instead, Harley is significantly improved over the past couple of years with the more recent times witnessing its expansion in emerging markets. Given that the manufacturer sells more on its brands and less on the motorcycle itself, Harley-Davidson definitely seems to be in a positive space right now, while preparing for the future with electric powered motorcycles.
KKR has an expansive history in the financial sector and is one of the biggest private equity firms globally with $126 billion under just assets management. The firm has a reputation of conducting leveraged buyouts on vulnerable companies, and the recent rumours suggest that KKR is looking to buy Harley-Davidson's outstanding stock for $65 per share, a 35 per cent premium over the regular value. This will either result in the equity firm becoming the complete owner or the largest shareholder of the motorcycle company.
Harley-Davidson Project LiveWire
Incidentally, this is not the first time rumours have risen about KKR buying out Harley-Davidson. Rumours were afloat back in 2010-11 as well, similar to the scenario today. This resulted in Harley's stock value soaring for a brief spell. While a buyout never happened, an investigation was conducted by the US Securities Exchange Commission for possible stock price manipulation.
Another factor that does not support the rumour is Harley-Davidson's current market standing. While the company may not be at the top of the sales chart in terms volumes, the bike maker is going bankrupt either. Instead, Harley is significantly improved over the past couple of years with the more recent times witnessing its expansion in emerging markets. Given that the manufacturer sells more on its brands and less on the motorcycle itself, Harley-Davidson definitely seems to be in a positive space right now, while preparing for the future with electric powered motorcycles.
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