KTM owner buys Husqvarna motorcycle brand from BMW

FRANKFURT Thu Jan 31, 2013 8:36pm GMT

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FRANKFURT (Reuters) - The owner of offroad motorbike maker KTM (KTMP.VI) acquired rival brand Husqvarna from Germany's BMW (BMWG.DE) on Thursday in a consolidation move that helps shave costs as the industry copes with a slump in Europe.

Entrepreneur Stefan Pierer, who owns a majority stake in KTM, told Reuters he was taking a page out of Volkswagen's (VOWG_p.DE) book by buying the Italian-based company, whose one-cylinder enduros and motocross bikes are dubbed "Huskies" by their fans.

"Almost ten years ago we started a small platform strategy just like what Volkswagen does on a far larger level," he said in a telephone interview after the deal, declining to provide financial details.

"Even though this is a niche business, you have the same problem as in the car industry. Development costs for modern, sporty motorcycles are so high - especially for engines - that a small brand (like Husqvarna) can no longer shoulder them on its own."

Pierer's KTM also owns the Husaberg, a Swedish brand founded by two engineers in 1988 after Husqvarna motorcycle moved its operations to Italy from its Scandinavian home.

"I want to see Husqvarna sales double in five years time to 20,000 motorbikes," he said, adding that his immediate focus would be on rejuvenating the ageing line-up of offroad models.

Instead of fully integrating both companies, Husqvarna and KTM will be managed separately, while reaping the benefits of using common components.

"This way we can use common engineering platforms to develop a variety of models that have completely different characteristics for each brand," Pierer said.

Husqvarna generated roughly 65 million euros selling roughly 10,000 bikes, he said, while KTM sold 107,000 motorcycles with revenue of 612 million euros.

In a rare acquisition, BMW scooped up Husqvarna at the peak of the market in 2007 to improve its position in the field of light, sporty motorbikes and extend the range to include younger customer groups as well as the entire off-road and supermoto sector.

The market in Europe, however, has shrunk almost by half since the deal, and BMW never attained sustained growth of the business in the face of such harsh headwinds.

BMW said it was selling the brand as part of a strategic realignment of its motorcycle business to focus on urban and electric mobility "in the context of changing motorcycle markets, demographic trends and increasing environmental demands."

KTM by comparison has a strong position in the segment in which Husqvarna competes, with roughly 30 percent of the global market share in motocross and 50 percent in enduro, according to Pierer.

When asked whether he was concerned the two brands might cannibalise each other's sales, he admitted there would be a slight effect.

Overall, however, the Husqvarna brand would help it take share away from Honda (7267.T), Yamaha (7272.T), Kawasaki (7012.T) and Suzuki (7269.T).

"It's never 1 plus 1 equals 3, but it's certainly 2.7, and there are still four Japanese brands from which there's plenty to grab."

(Reporting By Christiaan Hetzner; editing by Andrew Hay)

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