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  1. #1 India's Hero considers acquisition of Ducati 
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    The world's largest motorcycle manufacturer considers Ducati purchase
    By Mike Hanlon


    08:39 March 6, 2012


    If you've been having trouble comfortably wrapping your brain cells around the concept of what were once proud national symbols of excellence changing countries, such as the Malaysian-owned Lotus, the Chinese-owned Saab and MG or the Indian Jaguar and Range Rover, then please be seated before reading further. It seems that India's Hero MotoCorp, the world's largest manufacturer of both bicycles and motorcycles is considering the purchase of Italy's deeply loved manufacturer of sports motorcycles, Ducati.




    To think that a brand that so closely aligns with Italian excellence and pride might become a symbol of India's rise to power is possibly unthinkable to the Ducati faithful, but the cold hard facts are that Ducati is up for sale, with a reported price tag of around a billion dollars, and with its own MotoGP programme, superbike heritage, technology and design, it's the perfect fit for a company like Hero that has 3,000 dealerships and needs a new non-Honda range of motorcycles just a few years from now.


    Hero has grown rapidly as India has motorised, and recently ended its 25 year association with Honda Motor Corp. With cash reserves believed to be in the vicinity of US$1,000 million dollars, the company is now in acquisition mode as it seeks to replace Honda's technology with its own.


    Most major automotive and motorcycle manufacturers have built their company on the home market initially, and Hero already has built itself a sizeable fortune selling low-priced scooters and motorcycles to the world's second largest country.


    Just as automotive manufacturers are lining up for a crack at the burgeoning Chinese automotive market, the opportunity in India may be trailing the Chinese market penetration of the automobile, but the opportunity is even greater.


    In 2009, China had a per capita vehicle ownership of 128 per thousand people (0.128). If it had the same per capita car ownership figure as the US currently has, there's be double the number of cars on the planet. Remarkably, China's per capita vehicle ownership levels are the same as America's were in 1923.


    India's population will be the largest of any country 30 years from now - 1.5 billion human beings.


    India's vehicle ownership ratios are currently the same as America's were in 1912 - when the Model T Ford was top seller.


    Between now and when the Indian population can afford to buy cars, they will buy motorcycles. Last year just shy of 10 million motorcycles were sold in India, and Hero MotoCorp is planning to sell that many of its own brand just four years from now.


    Hero famously got its start manufacturing bicycles for the home market in 1956, evolving from a family-owned bicycle parts business established in post-ww2 Amritsar. As India's massive population needed transport the company's bicycle manufacturing business grew every year, becoming the largest bicycle manufacturer in the world during the 1980s.


    Using the cash generated by the bicycle business, Hero diversified and in 1984, partnered with Honda to create Hero Honda. The company's success has been astounding since.


    By 2004, Hero Honda had become the world' largest manufacturer of two-wheelers, driven by its dominant 50% share of the Indian market.


    The high standards of the company's manufacturing capability need little validating other than a list of clients for which it manufactures a comprehensive array of high tech parts, from engines to entire vehicles - Toyota, Nissan, General Motors, Rotax, BMW, Bosch and LG.


    In 2010, Honda sold its shares in Hero Honda to the Munjal family and has set up in India to produce its own motorcycles independently, while Hero Honda has become Hero MotoCorp and intends to go it alone. The upside of owning its own technology is that it can apply its massive manufacturing scale to supply motorcycles worldwide, and obviously, Ducati's global network provides another opportunity for expansion.


    The contract with Honda involves the continued supply of Honda models and technology until 2014 - after that, all Hero's designs and technology will need to be licensed, purchased or developed.




    Acquisitions is the route the company has decided to take and it recently entered into a partnership with Erik Buell which might well see Erik one day given the opportunity to design whole motorcycles without needing a legacy powerplant. That's exciting in its own right.


    As I write this, I am wondering just what the general reaction of Ducati fans might be. If Ferrari, a company so closely aligned with Ducati that they share race sponsors and even press events, were to be offered for sale to any foreign company, I suspect there might be government intervention.




    That's unlikely to happen with Ducati - it's clearly for sale and money talks all languages, so unless an Italian buyer emerges, Hero MotoCorp might well become the proud owner of one of Italy's most visibly successful companies.


    It's far too soon for any indications on what Hero might do with the Ducati brand and its technologies but anything is possible. If you have fears that the Ducati name will be discontinued, fear not - there's plenty of life in the company yet, just maybe not in Italy.


    Iconic national symbols have been treated well by India in the past, with Range Rover and Jaguar strengthening their positions under Tata, and even the Royal Enfield Bullet is still manufactured and sold in India.


    It's also quite ironic that Hero's main local competitor, Bajaj Motors, owns 40% of another iconic national motorcycle manufacturer - Austria's KTM. Bajaj recently opened 34 KTM stores in India and is heavily promoting the Duke 200 sports bike to the growing sports bike market.


    One of the strongest possibilities if the Ducati sale goes through to Honda, is that we are almost certain to see small capacity Ducati sports bikes again.
    jkp
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  2. #2 Re: India's Hero considers acquisition of Ducati 
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    G'Day,

    Few rumours around, during the last two days the grapevine says VW (Audi) acquired Ducati already, time will tell.

    The Indian stories are all over the place.
    http://www.ducatinewstoday.com/2012/...ducati-suitor/
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  3. #3 Re: India's Hero considers acquisition of Ducati 
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    Better Hero than Jialing!!!!!

    Cheers
    jkp
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  4. #4 Re: India's Hero considers acquisition of Ducati 
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    Ducati was removed from the Milan stock exchange in 2008,then acquired by a private equity group, it is very heavy in debt.

    This rumor actually made Hero stocks fall in value, that is because acquiring a manufacturer that is not profitable will drag down earnings per share.

    There is really no value in Ducati to AMG or Volkswagen, the company would only have value in that of the emerging markets. Markets that can capitalize on the brand by introducing domestically made models under it. Then also in selling those internationally as well. The core Italian operations cannot be dismantled or moved it would destroy the brand name, they do know that. For example Qianjiang did not believe that they could get away with moving the Benelli operations to China. They do not buy the intrinsic value to destroy it

    If you are a Ducati fan and believe that them being acquired and then subsequently capitalized by an Indian corporation is bad and believe that a German auto company would be a better suitor, could not be any more wrong.

    If Ducati goes up for auction, they will sell to the highest or only bidder, the Chinese are likely to come to the table
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  5. #5 Re: India's Hero considers acquisition of Ducati 
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    Quote Originally Posted by MJH View Post
    ...

    This rumor actually made Hero stocks fall in value, that is because acquiring a manufacturer that is not profitable will drag down earnings per share.

    ...
    This shortterm shareholder thinking in quarter of a year reports got us in this mess first hand.
    I'm happy that Volkswagen and most of the German economy is not following this. Strategic investors that are interested in longterm longterm prospects help a lot.
    Check who are the big car manufacturers in developing marktes, I see VW in China & Brasil all the times...
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  6. #6 Re: India's Hero considers acquisition of Ducati 
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    A German company buying an Italian company has nothing to do with emerging markets. They get no additional access to those markets with that type of merger, the ideal partner has to have capital and also access to growing markets from within. Selling into emerging market can be profitable but only limited because of trade restrictions and high tariffs.

    Hero is the likely candidate, but they have a huge gap between offerings, but certainly have all the capital they need to make it work, it would take time to do that. Their ability to do that or the actual real world probability of failure to do that lowered the stock value.

    India is the place to manufacture motorcycles, they allow foreign investor as wholly owned operations. Honda operates HMSI independently in India.

    When a company is removed from the stock market, it is being downgraded to what is referred to as Junk Bonds. It’s actual real stock value lost all value because the actual company is not showing worth on paper it leverages capital through borrowing to keep operating. So those that held Ducati stock got nothing for their investment they likely lost money.

    So buying them means you better have a real good plan or nobody will invest and your stocks will drop in value. Means that you better have a plan on how to make money and in that increase sales and profit on the sales.
    That would be a line that is made in India and sold in India.
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  7. #7 Re: India's Hero considers acquisition of Ducati 
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    Quote Originally Posted by MJH View Post
    A German company buying an Italian company has nothing to do with emerging markets. They get no additional access to those markets with that type of merger, the ideal partner has to have capital and also access to growing markets from within. Selling into emerging market can be profitable but only limited because of trade restrictions and high tariffs.

    Hero is the likely candidate, but they have a huge gap between offerings, but certainly have all the capital they need to make it work, it would take time to do that. Their ability to do that or the actual real world probability of failure to do that lowered the stock value.

    India is the place to manufacture motorcycles, they allow foreign investor as wholly owned operations. Honda operates HMSI independently in India.

    When a company is removed from the stock market, it is being downgraded to what is referred to as Junk Bonds. It’s actual real stock value lost all value because the actual company is not showing worth on paper it leverages capital through borrowing to keep operating. So those that held Ducati stock got nothing for their investment they likely lost money.

    So buying them means you better have a real good plan or nobody will invest and your stocks will drop in value. Means that you better have a plan on how to make money and in that increase sales and profit on the sales.
    That would be a line that is made in India and sold in India.
    Didn't we see a Ducati model announced in India just a few months ago? People scratched their heads at the time....

    cheers!
    jkp
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  8. #8 Re: India's Hero considers acquisition of Ducati 
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    AMG and VW bring in what, mangers, engineers and designers the Italians would take offense to that. In the interest of Hero the Italians would be flattered because their value is prized. In the instance of German buying them, its then considered a matter of failed operations and not economics, the later of which they cannot really control, only are subjected to.

    Ducati needs capital and access to growing market, then the economic problems are gone. They then can create and develop and in that continue.

    Alternatively VW could build the largest manufacturer of motorcycle in India and all the real stuf that comes with that and use the Ducati name to sell them.
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  9. #9 Re: India's Hero considers acquisition of Ducati 
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    If Ducati had great value their stock would not have been removed from the Milan exchange, the most prized companies are often taken over aggressively through stock purchases, Bajaj paid for its share in KTM on the open markets and also disclosed no interest in a majority holding, that is smart diplomacy. .

    http://epaper.livemint.com/ArticleIm...006_005&mode=1

    Actually Bajaj capitalized KTM and in exchange for technology and market access That is what investing is for, it offers capital as a reward for performing well and with expectations of increased performance in the markets. If the exchange comes with additional opportunities it becomes very positive, it benefits everyone.
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  10. #10 Re: India's Hero considers acquisition of Ducati 
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    Should not be a bad move if VW takes over.
    Bentley, Bugatti & Lamborghini have been left alone on their marketing and brand awarness, and have improved on their financial and technical level.

    This from Autoblog on the matter:

    Rumors of a possible motorcycle brand for Volkswagen aren't anything new. It's a well-known fact that Ferdinand Piëch, Chairman of Volkswagen's Board, wishes that the German automaker had purchased Ducati back in 1985 when the Italian bike manufacturer was in dire financial shape.

    As recently as last year, Piëch – himself a Ducati rider even at age 72 – commented that
    Volkswagen could still purchase an unnamed motorcycle manufacturer if the conditions were right. Strike up the rumormill again, boys and girls. The Italian motoring press is reportedly signaling that Volkswagen is making renewed overtures toward Ducati, which, like pretty much all other motorcycle manufacturers these days, is seeing sales and profits take a dive due to the sorry state of the global economy.

    Just a few weeks back at the
    Frankfurt Motor Show, Piëch indicated that the Volkswagen Group was looking to expand, and some took that to mean it would procure a sizable stake in Suziki, another long-rumored target of the German automaker. KTM, maker of the bonkers X-Bow roadster, has also been bandied about as a potential partner. So, is there any truth to the two-wheeled VW rumors? We'll see how it all pans out soon enough, but we're not exactly holding our breath.
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