Cycle News is a weekly magazine that covers all aspects of motorcycling including Supercross, Motocross and MotoGP as well as new motorcycles
Issue link: https://magazine.cyclenews.com/i/128343
Aprilia: Game, Set and Match to Piaggio? I n a dramatic reversal of fortunes over the past two months, that increasingly appears set to be the outcome of the battle for control of the troubled Aprilia Group, also comprising Moto Guzzi and Laverda, whic h is now in the hands of its creditor banks. This comes after the Aprilia board of direc tors on August I3 accepted the takeover rescue plan proposed by the Italian scooter giant (now controlled by financer Roberto Co laninno through his IMMSI investment vehicle) in preference to that of its rival bidders Ducati, whose majority shareholder remains the giant American equity house, TPG. "We're not arrogant enough to believe that the banks have no choice in the matter - hard at work preparing its own cou nter-offer after a meeting of its board on July 13 authorized Cola ninno to make a bid for a firm which is its larges t Italian rival in the scooter mar- that Piaggio's offer will meet with their mo torcycle sector - a target which had seen approval, and as an indication of this, on ate , for the time being at least, as a separate Piaggio's previous management attempt to cement a costly abortive merger wit h August 18, the Aprilia board o f directors was slimmed down to just three people Candido Fois and Franco Cattaneo, who remain as president and CEO respectively, joined by Mario Ferrero, a Colaninno/Piaggio appo intee. And to mark the Italian business community's approval of the outline deal, shares in IMMSI rose after the announcement, with Aprilia unions guardedly welcoming it while awaiting confirmation of the lack of layoffs. So w hat's the deal? In co ntrast with Ducati's rejected offer, which included a Euro 40 million (abou t $48 .5 million) capital increase and a debt-for-Ducati-stock offer for Aprilia's creditor banks, Piaggio will repay in full Aprilia's Euro 100 million ($121.7 millio n) bonded loan , which falls due in May 2005, but before then it w ill come up with an immediate Euro 50 million ($60 .8 million) entity under the Piaggio umbrella, retaining its own commercial identity, model range, d istribution network, etc. - a fact which will bring comfort to Aprilia dealers around the Claudio Castiglioni's MV Agusta Group. This offer was du ly presented on July 29 - two days before the expiry of Ducati's preferredbidder status - with an August 14 deadline for acceptance . "Ducati's bid was solid from an industrial and strategic point of view," says Aprilia CEO Franco Cattaneo, "but it didn't meet Aprilia's immediate needs or the expectations of its motorcycle press for the first time at side, Piaggio's was much the more attractive Munich's Intermot show on September 14. offer because it not only resul ted in the banks which today effectively own the company receiving back again a much higher pro po rtion of the money which they have tied up in loans to Apri lia, it also provided for more cash up front to keep the company operating I'll be surprised if the banks don't come to the same conclusion in recognizingthisdiffer- ence: ' The depths of Aprilia's cash crisis first became apparent on April 15 of this year, when the company's Scorze factory was shut down at the height of the crucial spring seiling season, and its 650 -5trong workforce was laid off, together with 250 employees at the Mande llo del Lario plant of its Moto Guzzi subsidiary. His company in debt to the tune of Euro 350 million (just over $42S million), company owner Ivana Beggio was forced to resign from the presi dency on May 6 by Aprilia's seven principal creditor banks, which in return underwrote an additional Euro 30 million (just over $3 6.5 million) line of credit that allowed the two factories to restart production . By now it was evident that Aprilia could not survive on its own, and the company's new bank-appointed managemen t - headed by Beggio's replacement, Cand ido Fois - and Franco Cattaneo, since March the group's CEO, open ed negot iat ions aimed at a full or partial takeover with the main stakeholders. When viewed side by while a final conclusion was arrived at and foresaw no redundancies ~ a crucial aspect in protecting the interests of our workforce and ensuring a smooth transition for the takeover." On August I, therefor e , the Aprilia board formally rejected Ducati's offer for the co mpany and opened negotiations with Piaggio , wh ich in tum commenced corporate and financial due d iligence on its potential target. "We are strongly convinced that our offer represents the true value of the Aprilia Group, and it will remain on the table ," said Ducati's MinoU in declining nonetheless to join a Dutch auction for control of the company via a bidding war. But, as a reminder of the pressures on Aprilia's production that the firm's financial troubles had bro ught in its wake, the 200 part-time workers who join the assemb ly line seas ona lly in September each year to boost new model year production had their contracts terminated on dozen or so companies who had exp ressed August 6 without recall - a spinoff fro m the interest in acquiring the ailing company . collapse in Aprilia's business wh ich saw its These were in turn duly narrowed down to a straight two-way sta ndoff between Ducati and Piaggio . The American-controlled sportbike specialist was first out of the blocks on July 7, when Ducati president Federico key Italian home market sales of 50,900 powered two-wheelers in the whole of 2003 slashed to just IB,56 1 units in the first six mon ths of 2004, rep resenting a dr op in market sha re fro m 12.6-percent to 7. I-percent in a growing market, of which Piaggio presently ho lds a 19.5-percent slice. MinoH presented a formal offer to acquire the whole of the Aprilia Group, rather than just Moto Guzz i alone , as Minoli had previously intimated he would seek to do. O n July 17, the Aprilia boa rd announced that Ducati had been given pole position in the takeover race by appointing the Bologna-based companyas pre ferred bidder untilJuly 31, leading to widespread conjecture that a formal agreement would shortly be signed for Ducati to become the new owner of Aprilia. Meantime, however, Piaggio had been 8 SEPTEMBER 29, 2004 • cha rge of run ning the company during the negotiat ion period, there seems little doubt Piaggio (or Gilera?) narne, and Piaggio would prov ide engines to Aprilia fo r use in its scooter mod els at a disco unted price . This final pro visio n clearly shows that Colan inno intends tha t Aprilia should co ntinue to o per- ket, as well as its entree into the buoyant we have our job, and they must do theirs," Colaninno said in addressing the world's "But I'm convinced that Ducati 's offer is not comparable with ours in financial terms. and ban ks have effectively con tro lled Aprilia since April and that their nominees have been in Piaggio's investigative beancounters worked fast, and on August 13 - one day before Colaninno's deadline - a deal was announced . The Aprilia boar d of d irecto rs forma lly accepted Piaggio's offer, sub ject only to government approval under antitr ust! monopo ly legislatio n and a ru bberstamp agreement from the debtor banks, both due to be fo rt hco ming by no late r than September 30. Given, however, that the CYCLE NEWS hike in capital aimed at eliminating outstand- ing debts to Aprilia/Guzzi component suppliers, as well as repaying in full the Euro 30 million ($36.5 million) additional loan granted in May by the creditor banks. In additio n, Piaggio will negotiate - and underwrite - a restructured line of credit of up to Euro 70 million ($B5.2 million) for the Aprilia Gro up, th us giving its new acquisition breathing space in order to get properly back on its feet again, and it will o ffer the banks the chance to swap Euro 110 millionof debt into so-called "financial instruments" to be issued by Piaggio. Piaggio has not defined w hat these instruments would be but says that they would mature between 2007 and 2009, and guarantees its future worth as anywhere from a minimum of Euro 22 million to a max- imum of Euro I 10 million, depending on the accrued value of the Piaggio-Aprilia Group du ring that peri od . In other words, go with us, and you might get all your money back, or at the very least 20 cen ts in th e Euro. A similar offer is also on the table for Aprilia shareholders (essentially therefore the Beggio family), up to a maximum of Euro 20 million - and although not part of the agreement, it's envisaged that Ivana Beggio would rema in attached to the company he built up and lost, by being appoi nted honorary president of the Aprilia division of the Piaggio Group, with an advisory role in strategic development of new models and serving the needs of the market. Finally, the deal specifically foresees a commercial agreement - wit h a Euro 20 million value ceiling - between Piaggio and Aprilia, whereby Aprilia would supply a range of special motorcycles (it's not de fined what these would be, though) for sale under the 40th Anniversary world , and their customers. Neve rth eless, even after the pre liminary dea l was signed between Piaggio and Aprilia, Ducati remained hope ful that it could prise Moto Guzzi away fro m Piaggio, togeth er with the rights to the RXV450/5 50 off-road models being deve loped for Aprilia by fo rmer Husqvarna tech nical guru Am pelio Macchi and his team. But, immediatey after, Federico Minoli had restated this intention at Ducati's Interm ot press conference on September 14, Colaninno specifically rejected it just one hour later, speak ing at a Piaggio press call. "We regard the opportunity to unite Piaggio with the Aprilia Group in its entirety as the key step in creating a major European axis, which will be a leading player in the world motorcycle market," he stated. "The merger between Aprilia and Piaggio will lead to the creation of the world's fourth largest manufacturing gro up in the two-whee led sector, with over Euro 1.5 billion ($1.825 billio n) in annual sales, an annual volume of more than 600,000 units produced worldwide by a workforce of mo re than 6000 employees in eight production facilit ies ranging from Europe to China, via India, and a full prod uct range which will include Moto Guzzi, as well as a range of off-road models comprising Vtwin products. Piaggio's business plan for the re launch of Aprilia fo resees the enhancement of the Aprilia Group's brands and trademarks in both the scooter sector, and the divisions of racing and roadbikes, as well as the integration of technological skills with the Piaggio Gro up , es pecially in the e ngine sect or. We envisage the preservation in full of the business activities and workforce of the A prilia Grou p, in conjunction with the identification of design, production and marketing synergies in the new group, both nat ionally and international ly." In other words, business more or less as before - but under Piaggio's co ntro l, with much stronger financial control and a chance that the whole will represent very much mo re than the sum of the parts, especially in providing a genuine European compe titor to the leading manufactu rers of Japan , Inc. in every model sector, both mainstream and niche alike. If the marriage between Piaggio and Aprilia goes ahead, as now seems very likely, the world of European motorcycling will never be the same again. Alan Cathcart