Harley-Davidson Shares Surge 20% on Takeover Rumor

Companies and Brands

Published: July 2, 2016 9:53 am

Last Updated: January 13, 2020 6:08 am

Shares of motorcycle icon Harley-Davidson Inc. (NYSE: HOG) soared nearly 20% on Friday on a rumor that private-equity firm KKR & Co. (NYSE: KKR) might be interested in buying the company. The stock posted a multi-year low of under $10 in early 2009 before roaring to a recent high of nearly $75 in April 2014.

Since reaching that peak, however, growth has stalled and shares posted a 52-week low of $36.36 in January of this year. Increased competition, a strong dollar, higher costs, and lower wholesale volume combined to reduce operating income by $127.7 million in 2015.

Going forward the company said it plans to add 150 to 200 new international dealers by 2020 and by growing its U.S. customer base, among other things. In its annual report filed in February, Harley said it “plans to significantly increase its spending to drive demand” for its motorcycles and that it would fund this spending by cuts elsewhere. Between marketing and R&D, the company said it would reallocated about $70 million in spending in 2016.

If the rumor regarding an acquisition by KKR is correct — or even if some other private equity firm is involved — more spending may not be in the cards.

Harley-Davidson stock closed up 19.8% on Friday at $54.25 in a 52-week range of $36.36 to $60.67. The consensus price target on the stock is $50.67.

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