VW approaches Royal Enfield to buy Ducati

Eicher Motors-owned two-wheeler maker Royal Enfield has been approached by German car maker Volkswagen (VW) to buy its Italian motorcycle maker Ducati Motor Holding SpA,The Times of India today reported.

Late last month, Reuters reported that VW is mulling selling Ducati as part of its plan to streamline operations to help fund a strategic overhaul following its emissions scandal (See: Volkswagen mulls selling Italian motorcycle maker Ducati)

Reuters said that VW has already informed potential bidders and several strategic buyers have shown interest.

VW, Europe's largest carmaker, has hired investment bank Evercore to evaluate possible options, including a sale of Ducati, the report said and added that no decision has been taken on a possible transaction and the carmaker might still decide to keep the Italian motorcycle brand.

Eicher, which is looking to attain global leadership for Royal Enfield in the middle-engine category, is exploring terms of the acquisition, and how to fit Ducati within its own fast-growing operations, the report said.

Royal Enfield will benefit from Ducati's iconic branding, technology, heavy-bikes portfolio, and a good network in developed markets, the report added.

Ducati is owned by VW's Audi division through its Italian subsidiary Lamborghini. VW had acquired the marquee brand in 2012 from private equity firm Investindustrial Holdings SpA, for about €860 million ($935 million).

Bologna, Italy-based Ducati was founded in 1926 by three brothers, Adriano, Marcello and Bruno Ducati, and started making radio components.

By 1935, the Ducati family had built its first factory and made the first Ducati 60cc motorcycle in 1950. The Ducati family lost ownership of the company in the same year, and since then Ducati Motorcycles has changed ownership multiple times.

In 2005, Investindustrial Holdings, private equity firm BS Investimenti and Hospital of Ontario Pension Plan acquired Ducati from Texas Pacific Group.

Ducati currently produces motorcycles in six models, such as Superbike, Diavel, Hypermotrad, Monster, Multistrada, and Street Fighter and sells over 40,000 across the globe, with the US being its main market.

It also manufactures custom racing motorcycles for official teams, as well as for private race teams, and professional riders.

Ducati sells its motorcycles in more than 80 countries around the world with a primary focus in the European, North-American and Asian markets.

Ducati made annual earnings before interest, taxes, depreciation and amortization (EBITDA) of around €100 million and could fetch a valuation of up to €1.5 billion, or 15 times its core earnings - a multiple similar to that of Italian supercar maker Ferrari.

In 2016, Ducati sold over 55,000 motorcycles worldwide and had sales of €593 million (Rs4,000 crore).