Features
June 28, 2004 – Finance Digest
Piaggio Eyes Big Growth
Piaggio, the Italian scooter manufacturer, said it may double its output due to fast-growing sales in China and India. A deal has been signed with Chinese motorcycle maker Zongshen Group to produce 300,000 bikes. Piaggio also intends to expand in India, saying that “three billion people are changing their quality of life” and both markets have high potential.
Viper Motorcycle Plans IPO
Viper Motorcycle Company, New Hope, Minn., filed a registration statement with the Securities and Exchange Commission June 10, 2004, for a proposed initial public offering by the company of 1.4 million shares of its common stock and three-year redeemable warrants to purchase 1,400,000 shares of the company’s common stock. The company’s registration statement said 133,334 shares would be offered by certain stockholders of the company.
The company reportedly hopes to raise at least $6 million through the offering for debt reduction and operations. Lane Capital Markets, LLC will serve as the managing underwriter of Viper’s offering. Viper is developing premium custom V-twin heavyweight motorcycles.
Viper also announced that it has named Clyde Fessler as its chief executive officer. Fessler, 62, joins the company after a 25-year career at Harley-Davidson, Inc. He retired from Harley in 2002 as vice president of business development. Fessler succeeds Terry Nesbitt, who was named CEO following the retirement of John Fiebelkorn, who had been president and CEO since November 2002. Nesbitt, a company founder, will return to his role as executive vice president of sales and marketing.
Chinese Motorcycle market heats up
The Chinese motorcycle market is fast growing, and as sales grow, local Japanese operations are facing tougher competition with Chinese rivals.
Wuyang-Honda Motors Co. produces up to 1,750 motorcycles daily, and it expects to reach 2,000 per day by July.
A 50-50 joint venture between Honda Motor Co. (7267) and Guangzhou Motors Group Co. founded in 1992, the company makes 125cc motorcycles, and 100cc and 125cc scooters. It produced a record 412,000 vehicles in 2003 and is aiming for over 500,000 this year.
China is the world’s largest motorcycle market, with sales of 12 million units and exports of 2,783,800 in 2003, up 50.6% over the previous year, mostly to the Middle East and Africa.
Export increases are driving by low cost caused by competition among some 400 companies, including unauthorized plants making big-brand look-alikes. Yet the top 20 makers hold 70% of the market. Consolidation among manufacturers is seen as a possibility in the near future.
The major Chinese motorcycle manufacturers also see farming villages and their 800 million residents as a huge market. With domestic motorcycle sales at 60 units per 1,000 people, compared to 120 in Japan and 165 in Thailand, China has room for huge growth, particularly in the countryside.
Wuyang-Honda plans to increase dealers from 1,900 to 2,300 by the end of this year. Honda’s exclusive wholesaler has spun off regional subsidiaries in seven locations. The focus on farming villages may be heightened because restrictions on motorcycle registrations were implemented in urban areas since around 2000 to curb pollution and traffic accidents. That makes new motorcycle sales impossible in about 125 cities.
Proton Buys into MV Agusta
Malaysian car maker Proton is set to become an exotic motorcycle manufacturer after making a binding offer to buy a 55% share in Italian motorcycle maker MV Agusta.
Proton signed off on the deal earlier this month, six months after making its original offer, and is preparing to take control of some very prestigious branding including MV Agusta, Cagiva and even Husqvarna.
Not only will Proton have ownership of the brands as it does with British sports car and engineering company Lotus but it also is playing with the idea of moving those names around, possibly attaching them to a range of four-wheeled vehicles.
Officials at Proton Cars said MV Agusta carried a great deal of cache and prestige in Europe and a high-end, luxury performance car wearing the brand name was not out of the question.
The company also could do a Cagiva sports car or perhaps a Husqvarna four-wheel-drive. “It is certainly part of our strategy in buying a controlling interest in MV Agusta,” said a Proton official.
Explaining the purchase of the Italian bike company, the car company official said Proton had been looking to add to its design capabilities and believed Italy’s reputation as a centre for style and fashion made it a logical strategic purchase.
Bad Toys gets $12 million
Bad Toys, Inc., a Nevada corporation that manufactures and sells custom V-Twin motorcycles and custom street rods and provides brokerage service to custom, classic cars, and motorcycle owners, said it has completed an agreement for equity financing that would provide the company $12 million in funding from Cornell Capital Partners of Jersey City, N.J.
The deal is known as a standby equity distribution agreement. Under the structure, Cornell will provide a commitment to purchase an agreed upon dollar amount of a Bad Toys’ shares. The commitment would be available up to two years, renewable thereafter.
The standby agreement provides Bad Toys with the right to draw down on the facility. In contrast to a traditional secondary, the company would be able to raise capital at various times in the future, at prices the company deems appropriate.
Under those terms, Bad Toys may, at its discretion, issue shares to Cornell at any time over the next two years. The maximum total amount of the equity placements under the agreement is $12 million. Subject to this limitation, Bad Toys may draw down up to $225,000 per week. The facility may be used in whole or in part entirely at Bad Toys’ discretion, subject to an effective registration.
Bad Toys, Inc. began trading in November 2003 and traded from a low of 50 cents to a high of $1.85. The stock has been trading at about $1.80 recently.
Further information about the company can be found at www.badtoys.net. Information regarding Cornell Capital Partners can be found at www.cornellcapital.com.
Redline Gets Loan Extension
Redline Performance Products, Inc., San Diego, Calif., (AMEX:RED) has reached agreement with its primary lender, Community National Bank of North Branch, Minn., to extend the term of its approximately $2.4 million secured credit line through Nov. 26, 2004.
The extension will help the company fill approximately 400 orders it has in hand for the upcoming 2005 snowmobile season, said Mark Payne, president and chief financial officer. The company said it has shipped more than 50 units of its 800 Revolt snowmobile, and has provided at least one unit for nearly every dealer’s showroom floor.
Redline Performance Products, Inc. designs, engineers, markets, manufactures and sells snowmobiles under the Redline brand name.
