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Eurofile / BYALAN CATHCART P iaggio settled ~ CD ..c E G> U G> C 4 Mota G takeover uzzi The fate of Italy's Piagg io Group, manu fac tu rers of th e Ves pa sco ote r an d by some stati stics the wo rld 's third-largest constructor of p owered two-wheelers, has been settl e d . As r ev ea led so me m onths ag o in this colu m n, Pia ggi o management has been in negotiation for some time reg arding a possible acqu isition by Texas Pacific Grou p (TPG), the -based privat e equity firm lead ing U.Sc that purchased Ducati back in 1996, and has since float ed the Italian sportb ike s peci a li s t on t he s toc k m arke t, a fte r turning it around commercially. It' s now confirmed that the Piaggio sale is a done d eal - but with one major wrinkle : It wo n' t be TPG wh ich end s up con tro llin g Ital y' s scoote r gia n t, but their banking partners Morgan Grenfell Priv a te Equ it y, th e London-ba sed in vestm en t firm no w owned by Germany's Deut sche Bank. Under the terms of the selloff, Mor gan Grenfell will provisionall y end up own ing 80 percen t of the Piaggio stock, TP G ju s t 10 perce n t, a n d Umbe rto Agnelli, bro ther of Fiat boss Giovanni and ex-hus ba nd of founder Enrico Piaggio's lat e d au gh te r , A nto ne lla , the rem ainin g 10 percent. The dea l is un derstood to valu e Piaggio at Lit. 1.35 trillion ($752 milli on), for a company employing 6000 workers with a gross turnover of Lit. 1.85 trillion ($1.02 billion) in 1998, w he n after se vera l loss-m a kin g years, Piaggio finally posted a net profit. Th ese numbers do obscu re a potentially in terest in g sce na rio, because on the face of it the Piaggio deal is the exact reverse of the Ducati one, where it was TPG that took a majority shareh old ing, and Morgan Grenfe ll the minori ty one. Firs tly, there's a widesp rea d su spicion that the sp in-doctors are at wo rk here, with extensive re por ts in the Ita lian press head lined "Piaggio remains European - Germany in cha rge, not America," and "Vespa Control stays in Europe - Germans are the Masters of Piaggio." Quit e why th is s hou ld be seen as m o re d esirab le th a n an A m erica n takeover, af ter TPG ' s copy book tu rn around of Ducati, is hard to fathom - as well as essentially inaccurate, given that Morg en Gr en fell is a Bri tish-based, if German- bo ught, b anking operation. However, the final share-out of equi ty has ye t to be finalized, and TPG may well end u p deciding to ta ke a high er stake - especially as their experience in turni ng Duca ti around will be crucial in ta ck lin g the even bigger cha llenge of Piaggio. Whether th e America n-leveraged bu you t specia list decide s to d o that will d ep en d on its suc cess in refu eli n g its investme nt funds, w hich are essenti ally exhaus ted after a series of recent high profile Eu ro pean acqui sit ions, such as Switzerland 's Bally Shoes and Britain's Punch Tav ern s. To fuel its co ntinued pu sh in to tech no log y deals a nd into Eu ro pe, TPG is currently raising a further $4 billion cap ital pool on top of the two fun ds it already ope ra tes totaling $3.22 billion, almost 95 percent of which is alrea dy committed to a hu ge variety of high-profile investments . This left ins ufficie n t cas h availa b le fo r TPG to sna p upthe majority stake in Piaggio it had negotia ted - bu t wit h the poten tially lu cra tiv e Vespa b rand na me u p fo r gra bs, thi s was ev ide n tly regard ed as too good a deal to p ass up, es pecially with bitter LBO rival GE Capi tal Pa rtners also sniffing round Piaggio - hence the Morgen Grenfell majority take-up. "I' m sure there's a bit of paper lying in someone's sa fe which gives TPG the op tio n to take over cont rol of Piaggio once they' ve topped u p their inves tment The four th of Italy's famous four tro p hy marques is Moto Guzzi, an d here too there's a takeover in the wind , with Stefan Pierer, boss of Austrian off-road specialists KTM, confirming that talks have been going on between the two companies since 1998 ab ou t a possib le ou tright acquisition of the Mandellobased Italian manufacturer. Pierer - leader of a management group th at recently took KTM private agai n by b uying up aro und 95 percent of the company' s shares - has sta ted that a final d ecision abou t the merger will be taken by Christmas. Moto Gu zzi's American chairman Mark Hauser admits negotiations are in hand to sell a slice or all of the company (KTM is not thought to be interested unless it gains total control) to a ttract outside investment, and MV Agusta SpA (formerly kn own as Ca giva ) has been mentioned in the Italian press as an interested party. But MV chairman Claudio Castiglioni has denied this, and the level of debt attached to such a deal, as well as the high price apparently placed on the Moto Gu z zi name by controlling sh areholders Triden Rowan, are thought to be significant hurdles yet to be overcome. Ducati director Massimo Bordi has also admitted his company' s int erest in the histor ic brand, whose sha ft-d rive n V-twin cruiser a nd tourin g lineup would perfectly mat ch Duca ti's more sporty range. "But they value Guzzi at more than 130 billion Lire ($72 mil lion), wh ich is far too high, " says Bordi. "In its present situation the company is not worth more than between 30 and 40 billion Lire, esp ecially taking into account the antiquated production facilities at Mandello. The only thing of interest is the engine conc ept and the name - you have to st art again almo st from fu nd s:' says a Lond on-ba sed merchant b ank er specializi ng in the mo tor cycle in d u st ry . " Firm s li ke th is d on ' t ge t involved in dea ls of this nat u re un less it' s they who are in cha rge of rebuilding the com pan y and bringing it to market via a stock exchange flotation in a coup le o f years . I'd exp ect the com p a ny nam e to be cha nged to Vesp a SpA, too, to reflect added emphasis on the company's core product. But the main thin g is that the d eal's actually been done, and now expe rt outsi ders can tack le the task of reviving the mot orcycle industry' s sleeping giant." One of TPG/MGPE's key targ ets for fu ture Vespa sales will b e th e USA , w he re Piaggio riv a l Ap r ilia is in th e process of trying to relau nch the scooter as chic transp or tation in college towns. In fact, more th an tw o million Vespas have been sold in the USA, since dep ar tment store Sears & Roebuck took th e first shipment stateside in 1950. Now a guide has been p ublis hed for th e firs t time in Englis h on how to revive these "Roman Holiday" icons, entitled "How to Resto r e & Mai n ta in Your Vespa Motor scooter." It's w ritten by lifelong Vespa enthusiast Bob Darnell, who has the advantage of living in Phoenix, Arizo na, w here yea r- ro u nd scoo teri ng is d oub t le ss m o re p r a ct ical tha n, say, No rth Dakota. Da rn ell ' s ex pe rience of th e b rand , acquired du rin g his many years running a Ves pa rest o ration bu s in ess, comes throu gh well in the book, whi ch is published by MBI Pu b lishing under ISBN no. 0-7603-0623-0. It's a very timely publication. Maybe TPG will decide to give a copy free with every Vespa sold stateside. And what of Gilera? With Piaggio und er new owners, conjectu re now focu ses on their st ra tegy for th e co m pany 's p re s t ig e m o torcy cl e brand, Gilera - the inventors of the fourcylinde r transverse in-line motorcycle over 60 yea rs ago, and six-time winner of the 500cc World Championship in the postwar era, before retiring fro m racing in 1957 followi ng another season of total dominance at the expense of their MV Agusta rivals. With trophy marques like MV and Benelli returning to the marketplace with high-profile streetbikes, it' s un t h in ka bl e that TPG/MGPE won ' t Is MV Chainnan Claudio Castiglionl (left) considering a purchase of the troubled Mota Guzzi marque? Possibly, but so may be KTM. scratch to rebu ild the ma rque , and that has to be reflec ted in the price." With 1998 turnover down to Lit. 48 billion ($25 million) and losses of over Lit. 3 billion ($1.6 million) expected to more tha n triple this year, in spite of the succes s of the company's new sixspeed VII Sport model, Guzzi management may not have much time left in whi ch to cut a dea l - or to haggle about the price with Pierer and KTM, who are understood to have tabled a firm offer for the company. ma xi m ize th e ta k e on thei r Pia g g io acquisition by do ing the same with the Gilera nam e. However, it' s curren tly restricted to d oin g se rvi ce on a b ad ge-eng ine ering basis on Piaggio's performanc e scoo ters, a ft er the closu re b ack in 1992 of th e Gilera factory at Arcore, nea r Monz a. However; the bes t bet is that they' ll do this eithe r by selling the Gilera brand ou trig ht to a grou p of Italian inves tors alrea dy invo lve d in the m otorcy cl e ind us try, or "lease" the name to them in return for a slice of the projected operation already ag reed to w it h Piaggio's fo rmer managem ent, whereby a new four-cy lind er streetbi ke lineup u sin g bought -in Japanese eng ines in Italian bu ilt fram es will be marketed bearing the Gilera name. Wit h d e velo p m ent cos ts a nd le ad time for developmen t of any fou r-cylinder engine so great - as their MV Agusta rivals are in the process of underlining a nd with its fou r-cylinder heritage in mi nd, so that no new Gilera could use any other format , the Japanese motor option is the only way out. That's if a Gilera ra nge of models is to reach the ma rke t in ti me to catch the wave of superlative sportbiking with nostalgic overtones. Th is was al ready decided back in 1991 by Piaggio's then-managemen t, in conclud ing a deal with Ho nda for a supp ly of CBR600 engines to build a Gilera Su pe rs po r t con te nder - a p ro ject tha t was later scra pped wit h the d ecision to pu ll ou t of the motorcycle market. But this idea has now resurfaced, with significa nt p reliminary design work already complete on the first new Gilera four, a 600 Supersport s treetbike likely to be laun ched at Interm ot 2000 in Munich, and to en ter the 2001 World Supers port Cham pio nship . Th e m en behind the Gilera revival, who can' t yet be ide ntified publicly, say that reviving th e Ita lian marque' s legend ary sta tus throu gh compe tition is a high priority. He nce th e d ecisi on to kic k off w it h a Supersp ort mod el capable of competing successfully a t the highest level very quickly , ra ther than a four-cylind er 750cc Superbike w hich would take far longer to make its mark, if ever, against the growing lineup of one-liter V-twins. But a lOODec four -cylinder u ltrasport is nex t on th e agenda, to also avoid put ting the reborn Gilera in to head-tohead co m pe tit ion with the 750cc MV Agusta F4, wh ich can't be stretched any larger than 870cc. Thi s inevitabl y raises ano ther qu estion: Wh ich Japan ese en gine will th e new Gilera 600 use? Yamaha's R6 is out of contention, lea ving the othe r thr ee Japanese compan ies' in-line fou rs each u n d er co nsi dera tion . Suzu ki, eng in e builders to the wo rld , are prim e cand idates in view of th e ir su p p ly d ea ls alrea dy in p lace w ith Bimota, Cagiva, Laverda, Magn i, Ap rilia, etc., bu t the two-ti me World title-w inn ing GSX-R600 reignin g World Cham pio n is se t to be updated for 2001, and it's u nlikely su p-: plies of the new version wou ld be available for a Gilera laun ched at the sa me time . Th e sa me th ing goes fo r H onda 's ex pected new fu el-in jected ve rs ion of their short-stro ke CBR600 - bu t Kaw asaki's new improved version of the ZX-6? Hmrnm - cou ld be. TheM elling debacle In the wake of the sp lit with the company's engine designer Al Melling, U.s. based Norton Motor Inte rnational has issued a sta tement formally confirming' tha t it is unlikely to comp lete de velopm ent o f it s m otorcy cl e produ ct lin e a lre ady a n no unced - i.e. th e V-ei ght N em esis, etc. NMI has also declared it' s, seek ing a n ou tsi de e va lua tio n o f Mellin g' s desig ns a n d p r o totype s (through UK-based Vep ro), a nd th at "ma nagement is in discussions with various high-quality engine and componen t su ppliers about an alternative product lin e." These companies are understood to inclu de not only Webe r-MZ, as reported here earlier, for the 750cc parallel-twin which the Swiss-German a lliance has und er developme n t, b ut a lso French man u factu rer Voxan, for su pplies of its inno va t iv e fue l-i n jected 1000cc 72d egree V-twi n e ng ine, n ow in se ries: production af ter initial manu facturin g hiccups were sorted out by Voxan boss Jacqu es Gardette, by the simple expe di-, ent of hiring a pair of top prod uc tion engineers from Peugeot and Renault. Bu t apa rt fro m the drawbacks of going th e V-twin route - a kind of motorcycle orton has never produced since its last French-engine d bike (the

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