As much as MV Agusta is a famed and storied motorcycle company, its history is checkered with failure. Yet rumor has it that Polaris Industries (NYSE:PII) may be interested in helping to get the bike maker up and running. But both Harley-Davidson (NYSE:HOG) and Mercedes failed to make a go of it, and there's no reason to think the same fate doesn't await Polaris if it wades into the morass.
MV Agusta's lineage stretches back to the first world war, Italy's Count Agusta, and the family switching production from aeronautics to small-engine motorcycles that could provide cheap transportation. A passion for motorcycle racing, however, saw the bike maker slowly transform itself into a manufacturer of almost legendary cafe-racing-style bikes.
Today, it's seen as a maker of premium, high-end, high-performance motorcycles, but one that can't seem to keep its finances straight. Throughout much of its history, it has found itself financially strapped, leading to a string of partners and owners that have included Malaysian carmaker Proton, Husqvarna, and Italian financing company GEVI.
In 2008, Harley-Davidson bought the company for $105 million, financing the idea to branch out into sports bikes with $205 million worth of euro-denominated debt. But a little over a year later, Harley was announcing it was divesting the brand as the recession hit the motorcycle market hard. It was writing off the entire value of the goodwill it recorded at the time of the purchase, as well as losses on fixed and intangible assets.
After also closing down Buell Motorcycle, Harley basically paid Claudio Castiglioni to take the MV Agusta company off its hands, selling it back to him for one euro and the promise to invest $26 million in operating capital.
Despite the cash infusion, the luxury-sports bike maker still couldn't make it on its own, and in 2014, Mercedes, through its AMG performance brand, bought a 25% stake in the company. That, too, has apparently gone south, and while rumors of MV Agusta declaring bankruptcy proved not to be true, it remains a troubled bike maker.
Considering MV Agusta's history, there's a high probability Polaris would be walking into a minefield if it purchased the company. Although there are key differences between it and Harley-Davidson that could make the deal successful, I'm not certain the fit is right.
Harley-Davidson, after all, was and is a big-bike maker, one that dominates the market for 601-cubic-centimeter engines and above with a 50% share. Its purchase of MV Agusta -- and Buell, for that matter -- was an incongruous decision. Harley may have had its V-Rod motorcycle, but it just isn't seen as a sports-bike maker, and the people shopping Harley dealerships aren't the same ones looking at an MV Agusta F4, or a Brutale.
Polaris is also a manufacturer of bikes with engines sporting big displacements, and its Victory and Indian brands sport just as burly reputations. However, it does have a more sports-minded pedigree because it's the leading powersport-vehicle maker, and it could foster some synergistic affinity between ATVs and racing bikes. Its successful resurrection from bankruptcy of the equally storied Indian nameplate shows it has the chops to keep costs under control.
But all that might be overwhelmed by the continued presence of the Castiglioni family in whatever partnership might arise between the two companies. It's been said that Mercedes wanted to buy out the Castiglionis, but the family wanted to maintain control. In an interview with the Italian newspaper Il Giorno, Castiglioni chastises Mercedes as not being the strategic partner he thought they'd be.
He notes that, while many partners have come and gone, "Asians and Americans, and now the Germans, but who always remains, and over the years has invested 120 million euro in MV Agusta, is the Castiglioni family." That suggests to me that, because the Castiglionis have been the one constant in MV Agusta's modern financial woes, they could very well be the problem.
Polaris also has its hands full getting the Victory brand back on track, and keeping Indian on the path of stealing more share from Harley-Davidson. Throwing another motorcycle brand into the mix that would divert financial resources away from those primary tasks suggests the odds are high of lightning striking twice in saving a troubled, but famous, motorcycle brand.
It might be tempting for Polaris Industries to acquire a prestige nameplate like MV Agusta, but the cost of failure, like the odds against it succeeding, are high.