MV Agusta has a history of developing some of the most exotic performance motorcycles out there. Unfortunately, the company also has a history of financial instability, constantly struggling to carry a large amount of debt.
Despite reporting 100 million euros (US$111.8 million) of revenue in 2015 and a 30% sales growth over 2014, MV Agusta remains in financial trouble with a reported 40 million euros owed to suppliers and banks. Production out of Varese has slowed to a crawl while MV Agusta looks for a way to continue operating.
As a result, MV Agusta has filed for “concordato in continuità,” an insolvency proceeding under Italian law for the restructuring of debt to allow a company to continue operating. The company’s creditors (as well as its unionized employees) have 90 days to accept the proposal.
That MV was able to produce a 30% growth in sales last year while claiming a large number of backorders for 2016 means there is some hope of turning things around. To that end, MV Agusta says it has invested 15% of its annual revenue into research and development to expand beyond its core sportbike and naked streetfighter segments. MV is also making inroads with emerging markets, opening four showrooms in India earlier this year. But in order for these investments to pay off down the road, MV Agusta needs to be able to pay the bills today.
One possible solution is for Mercedes-AMG, which owns a 25% share in MV Agusta, to increase its stake in the company. Earlier this month, various reports out of Italy had the two sides negotiating terms, with Mercedes-AMG reportedly seeking a majority share. However Giovanni Castiglioni, MV Agusta’s president and 75% owner, is reluctant to give up control over the company.
Oddly, that stands in contrast to his late father, Claudio Castiglioni, who on more than one occasion, sold the company for millions only to buy it back for a nominal fee (the most recent buyer was Harley-Davidson which purchased MV Agusta for $108 million in 2008 only to sell it back two years later for a single euro). It’s a neat trick if you could pull it off, but it looks like Giovanni Castiglioni will have to go a different route.
Castiglioni may instead turn to other investors, with private-equity firm Investindustrial being a potential partner. Investindustrial, of course, is the former owner of Ducati, and obviously is familiar with owning Italian motorcycle manufacturers. The question is how much of a stake Castiglioni is willing to give up to Investindustrial or any other potential investors.