MV Agusta sale: Harley-Davidson paid Castiglioni €20 million, forgave another €103.7 million in debt

By Holly Wagner at Dealer News

Harley-Davidson paid Claudio Castiglioni €20 million to take MV Augusta back, and then forgave a €103.7 million loan that The Motor Co. made to MV Augusta while they were under common corporate ownership, according to documents filed with the Securities and Exchange Commission (SEC).

At the time of the sale, which closed Aug. 6, the exchange rate was roughly 0.75 euro to US$1. So the deal cost Harley-Davidson about $136 million at closing.

According to SEC documents, H-D “received nominal consideration in return for the transfer of MV and related assets,” yet put €20 million into an escrow account for MV Augusta Motor Holding, the company Castiglioni set up to buy it back. MV Augusta will draw the funds out over a year. Harley-Davidson spokesman Bob Klein confirmed the “nominal consideration” was €3, a little under US$4.

In addition, the sale and purchase agreement, signed July 31, specifies that H-D will forgive a €103,789,617.60 receivable.

“The receivable is money that Harley-Davidson had loaned to MV Augusta for operations while MV was owned by Harley,” Klein said. The sale agreement specifies that the receivable transfers to Castiglioni for €1.

If someone else had purchased MV Augusta, Castiglioni had contractual rights to “earn-out” funds that would have resulted from the sale of his shares. Both sides waived those rights in the deal.

The Motor Co. bought MV Augusta for $109 million in July 2008, when the American motorcycle icon was looking for ways to attract younger riders. Former owner Claudio Castiglioni stayed on as chairman of MV Augusta.

Harley-Davidson reported it has taken $162.6 million in writedowns on the value of MV Agusta since then, $61.5 million of that in the second quarter of this year. H-D’s board voted to seek a buyer for MV Augusta last August.

Even with the sale finalized, the pain is not entirely over. Harley expects more losses on MV Augusta in the third quarter “as the accounting and tax impacts of the transaction are finalized,” according to SEC filings.

Among other provisions of the July 31 sale and purchase agreement, H-D retains control of press releases and statements about the sale for a year from the Aug. 6 closing date.

Click here to see the full Sale and Purchase Agreement.

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