Will Malaguti make a comeback?

April 4, 2011 – (Motor Sports Newswire) – The situation in Italy has been pretty bleak. An analysis of Italian motorcycle and scooter sales a leading indicator for the health of the industry has still not recovered. The association of Italian Motorcycle firms ANCMA has made several presentations over the course of the last two years covering the decline, but as predicted cracks in the region are slowly appearing. One of them is Malaguti Moto (www.Malaguti.com) a name we keep hearing about from time to time and it’s more dramatic because it’s the last firm besides Piaggio Group (owners of Vespa, Piaggio, Gillera, and Aprilia) still left making scooters. These days most Italian brands are just names since Garelli, Benelli, Italjet are all made in China.

Malaguti has had its shares of trials and tabulations in the last few months almost being forced to close by its own employees. Last month they avoided disaster with the local region and union that could have led to a company disaster as reported by Romagna Noi. (http://www.romagnanoi.it/News/Romagna/Imola/articoli/278354/La-Malaguti-inizia-a-sperare.asp ) The company has been producing bicycles and motorcycles for over 80 years making it a staple of the Emilia-Romagna region.

Over the years we’ve heard the rumors of Ducati taking an interest because of their close proximity. Recent comments in the press about Ducati possibly looking at making scooters in Asia under the Ducati brand have led everyone to take a second look at Malaguti who holds the license for the Ducati edition scooters seen at the Moto GP with the race team. Contacts at Ducati have flat out denied any interest in acquiring Malaguti because of its decline and the fact that this idea has been floating around for much of the last decade.

The company is no longer a world-wide player, but it does affect the region in the sense that they support many local parts suppliers and it could be devastating for the region. The list of companies closing or about to close in the region are staggering including Moto Morini, Comex, Masiero, Verlicchi, Electroplating, RCM. The list of companies on the verge of collapse include well known names like Malaguti and Marzocchi. So the loss of Malaguti would deal another major blow to the Bolognese motorcycle industrial system.

Source:  http://www.ilrestodelcarlino.it/imola/cronaca/2011/02/27/465695-malaguti_rischio_chiusura_danno_intero_territorio.shtml

Publicly in Italy, the Malaguti family is shopping for possible partners to help save the company, but has been unable to find any due to their unrealistic valuation of the company. The news circulating in Italy is upwards of $30 million US dollars with $10 million going directly to the two shareholders that run the firm. The company is desperately needing assistance yet privately there is word that the reason it has not found a partner is because the owners wish to solely rely upon the assistance of the region ( in other words free money. )

It’s been rumored, they want to force Emilia-Romagna to subsidize the continued employment of the 200 employees and not invest anymore of the family money. It would appear they have given the region an ultimatum that they will close the plant unless helped. There also have been rumors the other option the family is looking at is to remove funding from pensions and other necessary requirements under Italian law and just close the firm. The fear of the shareholders closing the company repeats the endless cycle of Italian socialist style subsidies to non-competitive firms.

Some private banks and companies specializing in mergers have appeared, but they have all been thrown off by the overly ambitious list of contentions the owners have put forth. It’s been said the points that have stalled all possible negotiations is that the two family members, brothers Antonino and Marco Malaguti, own the land and want the new management to continue to rent the land and factory from them. They are also sitting on a quarter of 2010’s production unsold. It is a company in decline, which despite numerous attempts by the local Italian agencies cannot be revived unless fresh management is brought in.

Several US hedge funds have expressed interest in the project, but without guarantees of new corporate management, the removal of the current family / board from the picture; will not invest in the project. No management company in Italy has appeared capable of handling this project so the US firms have all been left in the dark about recapitalizing Malaguti. The biggest news is that a potential US investor had been found and was ready to invest when Mr. Antonino quietly fired the Financial advisory company in Milan he had hired. The family was trying to make an effort as required by Emilia-Romagna to find an investor, but once found he refused to listen to their suggestions and an offer from the German Management company that had offered to turn around Malaguti. Now you have a group of US investors all having heard about the potential buyout with nobody to contact since Malaguti is not answering the phones and there are no brokers involved since the company is currently on strike. So what is the deal did they really want a buyer or did they just want to pretend they needed one to get concessions from the Italian Unions?

There are many industrial holding companies in both the US and Europe that would easily come in, turn Malaguti around, and merge it with another Motorcycle company after streamlining the management and the Union agreements, but the owners of the firm seem unwilling to listen despite a solid US investment group and offer of help.  This is a sad situation to witness since it seems the story of many great Italian brands as they fade into obscurity without a succession plan that works in the current world-wide market unable to see past their regional squabbles. Malaguti is one of the last great Italian brands and unless the family is forced out will cost Emilia-Romagna thousands of jobs. As reported in the Italian Motorcycle press every job at Malaguti creates 5 jobs at other companies in the area since they are a major components buyer. The situation doesn’t affect us in America anymore since the company is no longer distributed, from my research the brand was imported into the US twice in 1970s at the height of the last oil crisis and in the early 2000-2005 period by Malaguti USA.  Still this is a company that has always been on the edge of a comeback and its sad to see them go the way of Benelli or Italjet.

In our opinion this sounds like the whole MV Augusta fiasco where basically the owners were bribed into going away only to have them buy back the company when it proved impossible to run. They want someone to pay them to go away, when technically they should do the right thing for the people and employees of Bologna and just leave. If the brand has any value today it is lost on the owners who have let the company slide in market share and production.

We believe Italian brands can be competitive and with the right management could be a world player. Ducati is a prime example of the right way of building an Italian luxury brand. Is there any hope for Malaguti? As of today the workers are on strike. In our opinion new owners and new fresh management must be found or Emilia-Romagna attempt to subsidize a money losing operation, it is likely doomed to failure. The subsidies and incentives they are offering to an outside American investor will only work if the management company is guaranteed an operation without the current ownership.

This matter was brought to our attention and we agree, it’s a real opportunity for the right US management team.

As always we’d like to hear your thoughts.

Jon Simms