MV Agusta and Proton : The Story

Proton and MV Agusta : The Story

"Proton lost approximately RM800 million selling M.V. Agusta for RM5. The buyer invested one Euro and made 160 million Euro" - Tun Dr. Mahathir (http://www.chedet.com/) *1

The Story

Purchase and Sales by Proton

In December 2004, Proton advisor and former Prime Minister Mahathir and the then CEO of Proton Tengku Mahaleel decided to buy MV Agusta for RM367.6 million, which represents a 57.75% stake: thus a controlling stake of an Italian motorcycle manufacturer.

Tengku Mahaleel said at that time that the purchase, similar with its acquisition of Lotus Group International, gave the group the engineering capability to develop a full range of transport products from motorcycles and watercraft to light aircraft and military vehicles.

However, in July 2005 Tengku Mahaleel was ousted as the CEO of Proton.

Khazanah Nasional Bhd, the government investment agency, which owns 42.7% of Proton, through the Proton board, exercised their most important prerogative as an owner – the right to hire and fire; and out goes Tengku Mahaleel.

On November 30, 2005, Proton Chairman Mohammed Azlan Hashim announced the appointment of Perodua Auto Corp executive director Syed Zainal Abidin Syed Mohd Tahir, then 43, as its new managing director.

Heavily indebted, the manufacturer was bought by Malaysian carmaker Proton in December 2004 for 70 million euro.

In December 2005 however, Proton decided to cut its ties with MV Agusta and sold it to GEVI SpA, a Genoa-based financing company related to Carige, for a token euro excluding debt.

In 2006 that financing company, GEVI SpA, with 65% of the share capital, had refinanced MV Agusta, and by so doing allowed the company to continue, and brought MV Agusta ownership back to Italy.

Mahaleel and Proton advisor Mahathir strongly criticized the Agusta sale and demanded information on why it went ahead, saying their credibility is at stake over the deal.

Proton Chairman Mohammed Azlan Hashim claimed that Agusta failed to deliver the synergies expected

Husqvarna sale to BMW

In July 2007 MV Agusta Motor S.p.A, sold the Husqvarna motorcycle brand to BMW Motorrad for an undisclosed amount. (90 Million Euro (RM 450 Million) - chedet.com)
Accorting to MV Agusta president Claudio Castiglioni, the sale was a strategic step to concentrate all of the company's resources in order to expand MV Agusta and Cagiva presence in the international markets having more financial resources for new models development.

Acquisition by Harley-Davidson

On July 11, 2008 Harley-Davidson announced they had signed a definitive agreement to acquire the MV Agusta Group for $109M USD (€70M).



Why Proton Acquire MV Agusta
From the View Point of Tengku Tan Sri Mahaleel Ariff , Former CEO of Proton *2
"Recalling that it took some 14 months to deliberate on the purchase of Agusta, Tengku Mahaleel expressed surprise that selling it off took just two months to decide. According to him, the 14-month period began in December 2002 when Agusta was identified for acquisition" - Tengku Mahaleel

Reason for Purchase

(1) Agusta has the Technology

The key technologies which Agusta already has have been presented as one of the important reasons for acquiring it and he again emphasised them with more elaboration than before.

Being a motorcycle manufacturer, Agusta has the expertise to make small yet powerful high-tech engines and could develop 850 cc and 1000 cc engines for Proton models at 50% what it would cost Proton/Lotus to develop. Such engines would be RM2,500 cheaper than the engine currently used in the Savvy, and on a production run of 250,000 Savvys over 5 years, it would thus be possible to lower production costs by RM625 million.

This figure, he pointed out, more than paid for the 70 million euros which Proton had paid to buy over Agusta.

(2) Agusta has a Concept for a RM10,000 car and Patented airflow system

Tengku Mahaleel also revealed that Agusta had a concept for a RM10,000 car using unique manufacturing methods and also had a patented airflow system which was going to be used for the Campro engines. The Italian company also has a very unique gearbox which would be valuable to Proton

(3) Agusta could be a profit centre for Proton

Agusta could actually become a profit centre for Proton, he revealed the 2006 earnings forecast prepared by Price Waterhouse Coopers, an independent accounting firm, which was said to be a ‘conservative’ one. In the forecast (before tax), Agusta could be making RM73 million this year (best case) and even in the worst case, RM31 million. The forecast for 2010 was RM228 million.


(4) Agusta Debt Restrucring Plan

Tengku Mahaleel revealed the purchase conditions which were agreed upon when Proton bought over Agusta (or more accurately, acquired the MV Group through a share injection of 70 million euros). The conditions related to the settlement of Agusta’s debts with specific terms over a 4-year period, and he claimed that even prior to purchase, Proton had managed to reduce the debt level to 68 million euros.

Crucial to the survival of Agusta, which was on the brink of bankruptcy, was getting working capital and to address this quickly, it was decided that the unused credit line of 9 million euros available through Proton UK would be utilised. Also, group purchasing of Japanese parts worth 12 million euros was carried out, optimizing buying power.


Why Proton Sell MV Agusta
From the View Point of Datuk Azman Mokthar , CEO of Khazanah National Berhad *4
Extracted from Liputan Media Utusan Malaysia 30 Jul 2006

MINGGUAN: Penjualan MV Agusta terus dipertikaikan?
AZMAN: Dari aspek kewangan mahupun strategik, mengikut tinjauan kami sebagai pemegang saham
utama Proton jelas bahawa keputusan penjualan itu wajar. Walaupun saham Agusta dijual satu
euro, sebenarnya jumlah itu jauh melebihi satu euro oleh kerana bebanan hutang Agusta yang
berjuta-juta. Kita mungkin masih ingat suatu masa dahulu cadangan penjualan Keretapi Tanah
Melayu (KTM) sebanyak seringgit tiada sambutan kerana seperti Agusta, KTM juga ada beban
hutang beratus juta. Selama enam tahun berturut-turut Agusta mengalami kerugian, jadi mengikut tinjauan Proton, peluang memulihkan juga adalah amat tipis.
Dari segi strategik pula, sama ada motosikal dan enjin motosikalnya ada kaitan dengan Proton,
yang kami difahamkan ialah paling baik pun, tidak jelas akan kepentingan strategiknya kepada
Proton. Apa yang jelas adalah banyak lagi perkara strategik yang lebih penting yang memerlukan
tumpuan pengurusan.

MINGGUAN: Isu tender penjualan MV Agusta ini macam mana? Kenapa tender tidak dikeluarkan kepada rakyat Malaysia sahaja?
AZMAN: Mengikut laporan Proton kepada Khazanah, proses yang dilakukan memang teratur, dari segi
proses dalaman Proton dan juga mengikut proses luar termasuk undang-undang pasaran saham
dan sebagainya. Yang kami difahamkan dan perlu dijelaskan juga, oleh kerana Agusta memikul
beban hutang dengan pihak bank dan peminjam di Itali, banyak hak yang di luar bidang kuasa Proton, yang mana peminjam ada hak tertentu untuk menentukan pembeli.







References :-

(1) Tun Dr. Mahathir Blog - Chedet.com

(2) Tengku Mahaleel Speak Up on Agusta Issues

(3) Wikipedia - MV Agusta

(4) Khazanah - Datuk Azman opinion on the sales on MV Agusta by Proton for 1 Euro (30 Jul 2006)

(5) Mavericksm.blogspot.com - Proton Agustarded or Bagustarded (Cakap Tak Serupa Bikin)