Will the real MV Augusta please stand?
July 14, 2008
That gazer of navels writes :
‘…MV Augusta was bought during Dr Mahathir’s regime for 70 million Euro, which was equivalent to RM368 million or thereabout. When Dr Mahathir was gone, his blue eyed boy Tengku Mahaleel, the then CEO of Proton was also gone. Syed Zainal became CEO. And for reasons best known to only the Proton Board of Directors, MV Augusta was sold for 1 Euro. That is ONE EURO…Now, the sage doesn’t end there. CNN on 11.7.2008 reported that MV Augusta was sold to Harley Davidson for USD 109 million !!! That would be around RM 348 million. It is unclear whether the purchase was for 100% or only 95% of the company. The purchase price includes the absorption of a debt of about USD 70 million by Harley Davidson. That means the nett purchase price was USD 39 million. Whatever it is, it was not bought for Euro 1 or thereabout…’
Read the reast of this navelgazing HERE.
July 14, 2008 at 2:15 pm
There is an apt Malay saying for the ‘marriage’ between Proton and MV Agusta.
“Bagaikan kera mendapat bunga.”
A case similar to the fairy tale about the Frog and the Princess, except that it’s the Frog that’s trying to kiss and turn the Princess into another amphibian.
Yuck.
July 14, 2008 at 2:56 pm
Hi Haris,it does not take an economist or maths genius to tell us something is very wrong here.
Bought something at 70 million euro and sold it at 1 euro?Do you actually believe these Proton people are that stupid and dumb?I don’t think so,there must be something fishy and smelly behind this.
When thieves and crooks are handling the money…..this is what you will get.AGAIN,MALAYSIA BOLEH!
July 14, 2008 at 3:38 pm
I betcha if the Euro1 sale of MVA can be traced we can be sure some amno will be found
Sometimes it feels like I am living on the planet of the apes except in our case, some brainless dimwits are ruling it – in which case, it would be an insult to the apes to say this!
TDM may be VERY wrong in some things, but for once, I truly believe he has some justification for his righteous anger.
But then again wasn’t he the one to give us someone without the admin/finance know-how & experience to lead us?
July 14, 2008 at 4:35 pm
I tried to send this to malaysia-Today, but it seems for me. Anyway, I am one of those people who believe that Proton made the right decision in selling MV Agusta. It may have been the right decision at the wrong time, but as they say, better late than never.
As a motorcycling fan, especially motorcycle road-racing, I try to be in the ‘know’ of a few things in the motorcycle industry. And I know for a fact that MV Agusta is bad news in a financial sense.
When Tengku Mahaleel showed off that MV Agusta F4 bike with the Malaysian flag painted on the bodywork, I already knew Proton would be in trouble. MV Agusta was, and still is a company heavily in debt, and apparently the Europeans at that time have managed to snare an angel investor (more of an idiot investor) to try and save the sinking ship.
Malaysians keep pointing out how Proton sold off MV Agusta to that unknown Italian corporation Gevi SpA for the token sum of 1 Euro, but people (especially those aligned to TDM) tend to omit the fact that Proton basically saved themselves from paying back the huge sum of money that MV Agusta owed (more than 100 million Euros, depending on which source you are referring to).
In short, Tengku Mahaleel made a bad decision, and Proton ended up coughing more that 70 million Euros because of that bad decision. Forget about the potential of technology transfer, Proton owned Lotus Cars for almost ten year and so far they have gained very little in those terms.
Anyway, I found this piece of news last Friday. Apparently, Claudio Castiglioni, who was the original owner of the MV Agusta brand when he sold it to Proton, has now sold it to Harley Davidson Inc., that iconic American bike company. Now either Castiglioni bought it off Gevi SpA during the last few years or Gevi was actually Castiglioni’s front company, I don’t know.
Read the news here: http://www.superbikeplanet.com/2008/Jul/080711b.htm
More importantly, is the price which HD will pay for MV Agusta. In the article, it was mentioned that HD will pay approximately 70 million Euros ($109 million. Supposedly 45 million Euros ($70 million) of it is just to cover up the debts. In addition, the agreement provides for a contingent payment to Claudio Castiglioni in 2016, if certain financial targets are met.
What I’m trying to say is this: the Italians have managed to find yet another angel investor to cover up their bad decisions. When MV Agusta was sold to Proton, they managed to keep afloat with the help of then cash-rich Proton, long enough for them to buy it back at an attractive price, which is 1 Euro + around 107 million Euros of outstanding debt, something quite a lot of Malaysians doesn’t seem or want to understand. It was this very reason that Proton ended up being in the red after all these years of being in the black, in financial terms.
Read about it the original sale here:
http://www.mvagusta.net/newsarticle/31/proton-selling-its-stake-in-mv-agusta/
Moving on, is Harley Davidson technically buying MV Agusta at around the same price we (meaning Proton) paid for it? Actually no. When we bought MV Agusta, we got three brands: MV Agusta itself, Cagiva (which is basically MV Agusta with lower cc engines) and Husqvarna, the offroad bike manufacturer (not to be confused with Husqvarna, maker of chain saws and other industrial machines which is a different company altogether).
As have been mentioned elsewhere
(http://www.roadracingworld.com/news/article/?article=29685),
BMW has bought the Husqvarna brand earlier, so HD is paying more for the same company, so to speak. Notice that the debt owed by MV Agusta has now fallen off to ‘just’ 45 million Euros, down from 109 million Euros when we sold it off. No doubt the separate sale of Husqvarna managed to shave off some of the fat, but I’d like to say that we (again Proton) had a hand in lowering their debts.
Incidentally, you have to at least admire the genius (Claudio Castiglioni) in finding people (more like suckers) to basically pay off his bad debts while still keeping control of his company. Oh, and getting a bonus too if his company finally turns a profit.
Coming back to the ‘potential technology transfer’ angle, it was widely reported that Proton (read Tengku Mahaleel) wanted to use MV Agusta’s small displacement engine technology to be used in cars and planned to make MV Agusta and Cagiva-branded cars using said technology. I bet the passionate Italians will cringe at the sight of Protons badged with the MV Agusta logos if the plan did come to fruition. Some things are sacred to them, and doing so would akin to being sacrilegious. Like putting Ferrari badges on cruiser bikes, or even worse, small cars or minivans. Hopefully HD doesn’t plan to do the same, or else they might suffer the same fate as Proton did.
Tengku Mahaleel even used the analogy that Honda, the Japanese car maker, also made bikes and is successful in doing so, thus justifying his decision to buy MV Agusta then. Well, for one thing, Honda primarily considers itself as an engine maker, and cars, bikes, boats, chainsaws, lawn mowers, electrical generators, automatons like robots and even private jets are the few products that require engines, so they make those as well. Also, Honda started making bikes first before moving upwards to making cars, where else Proton plans to do the reverse.
Anyway, we all know Tengku Mahaleel is a speed freak, being a former racer. Owning MV Agusta is just to boost his ego, since MV Agusta is a legendary motorcycle racing marquee though no longer active in racing. Now you know why Proton, under his helm, always had fast-looking and performance-looking cars and never made a proper people carrier, which is what’s missing in their lineup and what Malaysians truly wanted to buy (the Juara doesn’t count).
Maybe next time I or someone else will write on Petronas’ near disastrous foray into engine and motorcycle making. Anyone here own a Proton Waja with the much-touted Petronas engine? A Petronas FP1 superbike? I thought so….
July 14, 2008 at 4:36 pm
Sorry I was trying to write “It seems down for me” when I was writing about Malaysia-Today on the first para.
Thanks.
July 14, 2008 at 4:51 pm
ala tax payers money ony what ? why we care ………..
July 14, 2008 at 4:56 pm
I think I can conclude that Proton sold back its 57.75% equity holding to Signor Castiglioni. After selling the stake to Proton, Castiglioni still holds 37.75% with the remaining held by Massimi Tamborini (2%) and 3% by Electrolux. Now the news…….
Harley-Davidson to buy MV Agusta
NEW YORK (Associated Press) – Harley-Davidson Inc. said Friday it agreed to buy Italian motorcycle maker MV Agusta Group for about $109 million to boost its presence in Europe.
The company said the purchase prices includes existing bank debt for about $70 million.
Under the agreement, Harley-Davidson will also pay Claudio Castiglioni additional payments in 2016 if certain financial targets are met. MV Agusta is privately held, with the Castiglioni family owning 95 percent of the shares. Claudio Castiglioni will continue to serve as chairman.
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I think Signor Castigliono is a shrewd businessman.
July 14, 2008 at 4:59 pm
Hey don’t blame mahaleel it was only 70 mil euros compared to the idiot who lost billions in forex trading. Now they will say without trial no error mah.
July 14, 2008 at 5:02 pm
What type of people have we got running Proton or for that matter Malaysia. Selling for 1 Euro dollar!!!
Unbeleivable!!
Even mamak great friend Mugabe can do better that this.
Give up.
We r already a BIG laughing stock to the whole world cause by our current stock of crooks running our government and now we have this.
TDM with is big mouth and poisonous tongue is real great and now with his appointed great sleepy head successor. Malaysia really boleh
July 14, 2008 at 5:08 pm
When you come across a pool of cow dung, place a beautiful cloth over it and tell the BN government or Proton theres gold underneath the cloth they will believe and would pay any amount to buy it.
July 14, 2008 at 5:10 pm
Alternate link to Malaysia-Today:
http://72.47.215.31/2008/
July 14, 2008 at 5:15 pm
What a good business here !!
GOV, Pls explain to public !! Another Screwep Up from Umno man to public fund !!
I have not really seen Proton really make use of Lotus brand …….. another similar case in doing ?
July 14, 2008 at 5:29 pm
When MV Agusta was sold to Proton, they managed to keep afloat with the help of then cash-rich Proton, long enough for them to buy it back at an attractive price, which is 1 Euro + around 107 million Euros of outstanding debt, something quite a lot of Malaysians doesn’t seem or want to understand.
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Try to understand this, If you have signed a share purchase agreement with Signor Castiglioni and agreed to pay Euro 70 million to recapitalise MV Augusta balance sheet and assume net operating debt of Euro100 million then you find that halfway MV Augusta is like a huge black cash hole and you want to get out. You execute another agreement and the Euro One dollar is just a consideration. You can’t have nil consideration in a contract. Like MFZ has written, Proton still have huge liabilities.
Mr MFZ, you may like to visit MV Agusta website, click news and search for a February 2005: Interview with Cagiva’s Claudio Castiglioni article.
July 14, 2008 at 5:57 pm
Mr MFZ, I am not commenting on your write up but quoted you to enhance my explaination on what I think most people misconstrue about the One Euro sales proceeds.
July 14, 2008 at 7:48 pm
Many people then and even now talk about the one Euro and ignore the fact that Proton had managed to pass on the huge liabilities MVA had already amassed before Proton bought the stake in December 2004. Some of these liabilities were described as ‘frozen’ and people like TDM and Tengku Mahaleel would rather people believe they will remain ‘frozen’ forever.
At the time of Proton’s foray into MVA, this Italian motorcycle maker was already in “receivership “(I had the link previously) and I suspect the 70 million Euros (RM368 million) paid for the 57.7% stake was the cash injection that was needed to convince the Italian court to release MVA from receivership. All the cash paid by Proton went straight into reducing debt. Proton had to pump in further working capital just to get it moving along and the money provided (totaling RM136 million) was a further loss and written off in the accounts of Proton for the year ended 31 March 2005.
In total Proton lost at least RM504 million in this fiasco.
There was no real synergy between MVA and Proton. Indeed, what could MVA teach Proton that Mitsubishi and Lotus couldn’t? Why did Proton invest in a company that was in such deep financial mess notwithstanding its famous brands? What happened to the due diligence?
The interval between purchase and sale was just a very short 2 years!
I think the whole board suddenly woke up to the fact that there was a huge hole that still required filling. This point was clearly mentioned when Proton announced its decision to sell MVA in late 2006.
I have to wonder whether the board members were fully briefed on the cash demands by MVA at the time the investment decision was taken. Were they misled or bamboozled?
In addition, there were still the contingent liabilities of over 100 million Euros. Thus when the financial advisers came up with the report that the future does not augur well for MVA, the board had no choice but to cover their sorry behinds and sell to any party that was willing to take on the working capital requirements of MVA and to assume that contractual liabilities Proton had signed up for.
If Proton had stayed on for a couple more years, perhaps it could have gotten a better price like what we read about now. Hindsight is a wonderful thing. But the board must have felt then the shit was about to hit the fan and so they dumped it immediately. Don’t forget also that if they waited for another two years for a better deal, Proton would have had to supply further working capital and this could run into millions.
I think Proton made the right decision.
July 14, 2008 at 8:19 pm
Who was the mysterious buyer of Augusta for 1 euro? Who is the seller now?
Why was the buyer never disclosed despite protest from Mahatir? For once I agree with this man that the whole deal stinks and I can smell it coming out from the 4th floor.
Mahatir, for once you are vindicated. No, that doesnt absolve your load of misdeeds during your administration.
July 14, 2008 at 9:32 pm
Cagiva have an agreement with an Indian two-wheeler manufacturer, Kinetic, who are now manufacturing the Mito 125 for Cagiva. These bikes are assembled at Kinetic’s manufacturing facility in Pune, India, and are then exported out of the country, to be sold in Europe and possibly elsewhere.
Recently, Pablo Chaterji, a photographer-journalist with a popular Indian automotive magazine – Motoring – traveled to Italy, where he met up with and interviewed none other than Claudio Castiglioni himself. Mr Castiglioni, of course, is the man who owns MV Agusta and Cagiva brands. Here are a few excerpts from what the great man had to say:
On selling off Husqvarna to BMW
Claudio Castiglioni: “This was a decision that we very carefully considered over a long while. Ultimately we decided that it was important to take care of our two important brands in the same way, and with equal attention. So we’ve decided to focus our attention mainly on the MV Agusta brand, and also on expansion of our brands.”
On the future of the F4
CC: “Our aim at MV Agusta is, of course, to make a product grow, but we don’t want to transform a product either. We would rather that the product evolved, rather than changed altogether. If a person bought an MV Agusta tomorrow morning, then five years later the bike would still be cutting edge. And even if we were to offer new models, then we would do so according to this policy.”
On his own role in the development of the F4
CC: “I was involved one hundred percent – from the conceptualization, to the first sketches to the finished product.”
On how it was to work with Massimo Tamburini
CC: “We worked extremely well together, as a matter of fact.”
On the possibility of MV making a supermotard
CC: “We may examine the possibility of getting into the supermotard segment, but if we did it, it would be according to our core values at MV Agusta. Firstly, of course, it would be different from anything else on the market. Secondly, it would be of higher quality and at a higher price as well, since we are essentially a luxury brand!”
On MV’s plans of getting into MotoGP
CC: “Not at the moment, no. I tell everyone that MV Agusta is the most historic name in motorcycle racing. We’re the Ferrari of bike racing. We will come back, of course, but we will come back to win.”
On whether he still rides
CC: “Yes, I do ride. My favourite bike is the Brutale, but for a rush of emotion, I ride the F4! I don’t go on long rides anymore though.”
On his favourite bike racers
CC: “My favourite riders are Rossi and Capirossi.”
On whether Rossi can win the MotoGP world championship this year
CC: “Well, he has Bridgestones now, so let’s see. But his engineers also have to work very hard, because his bike was just too slow [last year.] It was very bad!”
On his favourite cars
CC: “Well, I drive an Alfa Romeo 166 at the moment. I also have three Ferraris – an F40, which I think is the best Ferrari ever made, a Testarossa and a 360 Modena.”
July 14, 2008 at 10:41 pm
The only way to resolve it is:
Get the Auditor General to conduct an independent audit to ascertain:-
1. Who authorised the investment and how much was the final write off. Open up the books.
3. Why the Board was by-passed in the decision to sell MV Augusta. Why was the CEO, Tengku Mahaleel and paid advisor, Dr.M deliberately not consulted. Question the Chairman, CEO & BoD.
4. Why they did not try to dispose the shares by open tender? At 1 Euro everybody’s uncle and I would have been interested.
5. Who are the real shareholders and directors of Gevi Spa. Were any Malaysians the beneficial owners whose interest was concealed by nominees operating from off-shore tax havens, thereby avoiding our laws vis-a-vis conflict of interest and transparncy?
Otherwise we are all shooting in the dark, becoz all the official explanations are carefully couched in woolly language deliberately intended to gloss over the wholly pathetic performance of a GLC, with a cost and opportunity cost as well of perhaps RM 1 billion.
Don’t forget this money could have come in handy to Proton which only made a profit in the last quarter due to a Govt Grant of RM 192 million!!
http://donplaypuks.blogspot.com
July 14, 2008 at 11:19 pm
Bodoh, stupid or what? I really don’t know. But selling for 1 euro that’s plain stupid…..aha…maybe to one of the UM….Nos company.? Who knows…
July 15, 2008 at 8:52 am
Should not someone collect the losses from Dr. M and his cronies?
July 15, 2008 at 9:33 am
QED.
From the replies after my post, people still seem to be oblivious to the facts that MV Agusta is bad news before, during and after Proton sold it off. Except for wudan and Birdseye, everyone still think that Proton ’sold’ it for 1 Euro.
To yh, the buyer was an Italian corporation named as Gevi SpA. Supposedly it is linked tho the Carige group. However, from the looks of things, it is probably a front company for Claudio Castiglioni, the original owner of the MV Agusta group.
(BTW, it is not Augusta, it is Agusta minus the extra ‘u’. Augusta is the American golf course).
Donplaypuk, MV Agusta was sold AFTER Tengku Mahaleel’s contract was not renewed. He’s probably the only person in the board interested in keeping a financial black hole under the Proton group of companies.
Also, does anyone really want to buy a company for ‘only’ 1 Euro but also assuming 109 million Euros of debt (that means paying off an extra 109 million Euros on top of that 1 Euro to the creditors if you still can’t get the true meaning of all this financial mumbo jumbo)?
Incidentally, Tony Fernandez bought AirAsia for RM1 from DRB-Hicom but also assumed their debts. Also, A Kadir Jasin bought Berita Publishing from the NSTP Group for around RM1 as well and also assumed their debts. So basically it is a ‘normal’ business deal.
People who question the ’sale’ of MV Agusta for 1 Euro should also question the original purchase of MV Agusta for 70 million Euros. Like what Birdseye wrote, where is the due diligence in buying a company where you are ‘expected’ to throw in more money just to keep it afloat?
HD’s purchase price of 70 million Euros might seem a bargain, but still, they are paying 40 million just to cover MV Agusta’s debt. I bet there’s still more money needed to cover any other future debt payments that the Italians aren’t telling Harley Davidson.
July 15, 2008 at 11:00 am
Mahaleel dig the hole with shitty investment logic ( I like the brand so I buy, cause i Can) and his successors are not smart enough to turn it around. So, loose the money twice and lets move on.
July 15, 2008 at 3:01 pm
MFZ,
I agree with your take. 2 issues here :-
1) Wrong decision to buy (maybe, fraud too or just pure ego ?)
2) Right decision to sell but perhaps, don’t know how to value it or somebody hijacked it ?
If Proton had kept it, then be sure that taxpayers (suckers) will be called upon to bailout. And maybe, they have a brand called ‘python’ saga and the saga continues!
<de minimis
July 15, 2008 at 8:09 pm
Shall we introduce the mandatory death sentence of these corrupted individuals?
July 16, 2008 at 5:43 am
Sure smells suspiciously like someone’s been cooking investment appraisal numbers big time with great big smelly tuna fishies!
So…the second maybe potentially justifiable (but then again maybe not without more facts) cock-up was allegedly done to cover-up the first definite cock-up.
Haris, a hard question for you: Do two wrongs make a right?
And which (suspiciously iffy-smelling) M&A lot from which high-browed investment bank was it that advised Proton on that first very, very interestingly intriguing from an accounting perspective investment decision?
Was the risk of a cash-outflow black hole and scary liquidity crisis developing in Proton from potential overtrading ever considered in that first interesting deal?
And which M&A lot advised dear Gevi spa on that second disposal deal? Has anyone ever heard of Chinese walls and whispers?
Yoohoo…..calling
•Proton Audit Committee – do you exist?
•Proton FD/FC/Finance function, what happened?
•Proton’s external auditors – were these two deals picked up in the audit and management letter to Proton senior management and Audit Committee?
•Proton BoD: Any corporate governance in place? Any due diligence done? How about some regular risk assessment? Review of internal controls? Any oversight?
Alleged losses, crystallising within approximately two years of the initial purchase decision, in the stunning order of circa MYR504m or more of the poor rakyat’s (around 60% of whom apparently earn MYR3.0K and under) cash assets!??!
Yoohooo….anyone out there care to own up and take responsibility for another mega-cock-up, and criminal waste of the rakyat’s national assets?
Can those nice accountable “professionals” please raise your hand/s?
WE SAY YEAH!
July 16, 2008 at 4:47 pm
this topic is not my cup of tea at all. nothing to say but i would like to point out to all to read an article on this topic here at our benar blog.
July 17, 2008 at 1:14 am
lucia:
I did read the cogent article in your benar blog before my posting at 5.43am, so thank you for the facts.
WE SAY YEAH!
July 17, 2008 at 10:49 am
This is indeed an interesting cup of tea. Che Det wrote about MV Agusta sale in respond to a deputy minister comment that Proton made a profit by selling MV Agusta.
Che Det wrote, The buyer, Gevi Spa did take over the debt of M.V. Agusta but Proton’s share of the debt is 57 per cent i.e. 57 per cent of the total debt of 107 million Euro or 61 million Euro.
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Now, if I recalled correctly, Proton paid Euro 70 million to lift MV Agusta out of ‘amministrazione controllata’, temporary receivership proceedings under which the insolvent MV Agusta had been operating since Jan. 10, 2003. The Euro 70 million went to Banca Intesa. There was still the outstanding debts of Euro 100 million that Proton agreed to restructure with three principal debtors banks. The deal obliged Proton to pay the debt plus interest gradualy over a eight-year period. I don’t think Proton only liable to 57.75 share of the debts.