Harley-Davidson stock rose and fall on both sides of the long holiday weekend on rumors that the iconic American motorcycle manufacturer might be bought out by a investment firm named KKR and Company.
The investment firm is also known as Kohlberg Kravis Roberts. KKR earns about nine billion dollars a year on revenues of about $55 billion. The value of shares of the Harley-Davidson Motor Company increased 20 percent Friday to about $54 per share on rumors that KKR would buy the company for $65 per share. So far this week, the value of the stock has dropped 12 percent.
There were rumors that KKR wanted to buy Harley in March 2010. Neither Harley nor KKR would comment on the rumors last Friday.
Fatten The Tails
Overall, the value of the motor company’s stock has dropped about 30 percent since January 2015 and financiers seem to think Harley is ripe for a takeover because the stock may be undervalued. Harley stock traded for about $70 per share in 2014.
Harley’s ridiculous “Fatten the Tails” marketing plan seems to have failed. The title refers to a statistical abstraction called a “Bell Curve.” What the plan means is that Harley wants to continue to sell motorcycles to its core customers (who tend to be middleaged, working class men) and increase sales to international and “outreach” customers. The international customers are in places like India and China. Harley describes outreach customers are “young adults,” “women,” “Hispanics,” and “African-Americans.”
In an attempt to attract new customers to replace its aging ones, Harley has released two, new, smaller, cheaper motorcycles with engine displacements of 500cc and 750cc. The smaller bikes are aimed at members of the so-called millennial generation who continue to associate Harleys with Baby Boomers. Harley’s international marketing as also been frustrated by a strengthening dollar which makes the already expensive bikes even more expensive overseas. The same strengthening dollar makes Japanese motorcycles less expensive in the United States.
In the last year Harley has either laid off or announced plans to layoff 420 workers.
Four factors make Harley attractive to KKR. Harley’s core customers continue to buy motorcycles. The company is not yet as indebted as it could be. A new, private owner could sell off the company’s credit subsidiary, Harley-Davidson Financial Services to raise cash that would pay for the development of new products like Harley’s hypothetical “Live Wire,” an electric motorcycle and a new marketing plan. And finally Harley-Davidson remains the best known motorcycle brand in the known universe.