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Harley-Davidson takeover talk accelerates

Harley-Davidson takeover lovers
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Harley-Davidson Sportster Roadster takeover talkTalk of a takeover of Harley-Davidson by private equity firm has hit the share markets for the second time this year, sparking a share spike and some concern among owners.

Harley shares leapt almost 20% on July 1 2016 and 7.3% on September 22 as traders reacted to unsubstantiated talk of a possible takeover by private equity company Kohlberg Kravis Roberts & Co (KKR & Co).

Harley has denied the market talk, but there has been similar speculation of a takeover in December 2015 and again in 2010 by KKR. Each time shares have spiked, then dropped again after the rumours were denied.

This time the rumours come after Harley recently agreed to a $15 million settlement with the Environmental Protection Agency over sale of “super tuners” which boost power but break emissions levels.

The unsubstantiated but persistent takeover rumours will ring some alarm bells among diehard Harley fans of a return to the dark days of the ‘70s when American Machine and Foundry (AMF) bought the company, cut production costs, slashed the workforce and produced lower-quality bikes.

In 1981, Willie G Davidson led the buyback of the company which has since flourished.

Today, Harley faces increased competition at home from fellow American motorcycle companies Indian and Victory under Polaris ownership and discounted Japanese imports.

2017 Harley-Davidson Road King Touring Milwaukee Eight prices prices
2017 Harley-Davidson Touring and CVO range at the world media launch

However, the American icon continues to do well in foreign markets, including Australia where it is the top road-bike company.

The concern is that the takeover rumours concern a private equity firm which is notorious for buying companies where they believe they can either extract costs or combine with a similar company to reduce overheads, pump up the bottom line for shareholders, then sell in three-to-five years for a large return.

Extracting costs usually means less money for research and development, marketing and new models.

KKR is one of the original private equity buyout firms. They’re the big boys in this space and are famous for having acquired companies such as Eastman Kodak, RJR Nabisco and Toys “R” Us.

Harley-Davidson engine factory in Pilgrim Rd, Milwaukee takeover talk
Harley-Davidson engine factory in Pilgrim Rd, Milwaukee

We spoke to a corporate expert who confirms KKR is notorious for stripping and selling off.

“They usually put in a fresh management team and run things more efficiently which is code for sacking people,” he says.

“Sometimes they buy a couple of companies in the same space and instead of having two production lines they put everything through the same line and run it 24 hours a day.”

  1. Well.. as the Dick Smith experiment has shown (along with many others) PE Groups know how to buy a business, how to sell a business but not how to run a business.

    If they are successful then you can count on lower quality bikes and staff retrenchments big time!

    It’s what they do. Currently working in association with a PE Group who have changed manufacturing of product from Europe to China and quality is out the window. Just dreadful!

    1. Yes, it could be a big win for Polaris Group in the short to medium term, until Polaris becomes a target…

      1. polaris has a wide product base as did amf , not only does harley
        have only motorcycles it really only has cruisers while it is doing pretty well now
        [after some help] it wants to hope the cruiser market does not go off the boil

        1. Having a wide product base can make Polaris more attractive with a bunch of business units that could be sold off for more than the sum of the whole, somewhat like the way car and bike wreckers operate but on a much different scale.

  2. poor old AMF always gets villified but fact is HD would
    have sunk without trace without them. a lot of blame can go
    to the american worker who could not grasp the idea that
    america was no longer the only show in town.harley as only
    survived by protectionist policies of the american government

  3. Love or hate Harley Davidson, it will be a shame to see the motorcycling icon go though another period such as AMF. My last HD was an AMF bullshyte build, poor quality nightmare, that quite literally dissolved thousands of dollars to get to a quality reliable ride.

    After all the good work of Willie G, restoring the company from its death bed in the 80’s. Keeping in mind it had no home grown competition as HD has today with the Victory and Indian brands, making inroads into their market place.

    Not just dreadful, bloody immoral, nothing more than blood sucking parasites.

    Oh well, there goes the idea, of upgrading to the streetglide special. It has taken near 40 years to get the AMF bad taste from my mouth, in regards to HD products. I just couldn’t be bothered again.

  4. You forgot to mention that the main reason H-D didn’t go down the gurgler was because of President Ronny Raygun’s massive 70% tariff on imported motorcycles over 700cc, reducing gradually over five years. That was another prime of example of US protectionism, which buffoons like Donald Trump would like to re-introduce.

    1. You forgot to mention how much import duty the Japs were charging on imported motorcycles and also the fact that during that period the Japs were swamping the US market with excess production at virtually cost price , effectively exporting unemplyment and I dont recall it was anything like 70% , maybe 45% for the first year . America had every right to protect its industries where there wasnt a level playing field .

    2. You would be the sort of bloke who makes that comment but whinges about Aussie companies moving their manufacturing to China

  5. I think it would be good if HD disappeared. Most HD owners aren’t real motorcyclists, just posers who want to be able to say to their non motorcyclist friends that they own a HD. This would get rid of a lot of shallow riders

    1. There are many posers on bikes , riding many different bikes from cafe to cafe , only in summer , only on a fine day , never away from the street lights of the city .I own a Harley and regularly ride 1000km a day around Western Australia . Not all Harley riders are posers

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