One year after purchasing a majority interest in MV Agusta, Malaysia's Proton Holdings Bhd. sold its 57.8 percent stake in the exotic motorcycle manufacturer in December 2005 to Italian investment company Gevi SpA for one euro plus payment of $126.8 million debt and $38.5 million working capital requirements.
It was a highly controversial sale, one that created several public criticisms of Proton's handling of the matter.
Today, nearly three years later, as Harley-Davidson, Inc. plans to purchase the MV Agusta Group, Proton feels it prudent to publish a statement regarding its sale of the motorcycle manufacturer.
The following is a press release from Proton Holdings Bhd.:
SHAH ALAM, 16 July 2008 - Arising from recent media reports on the acquisition of MV Agusta Motors by Harley & Davidson, there has been uninformed speculation that Proton's disposal of its 57.75% interest in the troubled Italian motorbike manufacturer was not carefully considered.
Whilst Proton ordinarily would not comment on developments pertaining to MV Agusta or any other companies that it no longer has an interest, in the interest of clarity, Proton wishes to reiterate that the decision to dispose of its equity interest in MV Agusta (which was completed in July 2006) was in the best interest of Proton.
Given the limited options available and the conditions prevailing at that time, the decision was taken after due consideration of professional advice of an international investment bank appointed to advice Proton on the sustainability of its involvement in MV Agusta.
With MV Agusta's negative shareholders' funds, cash flow deficit and track record of years of losses, it was advised that developing the company into a positive operating cashflow entity will require substantial financial backing from Proton, over an extended period. This would involve considerable operational, financial and reputational (sic) risk to Proton.
It was advised that the integration of MV Agusta's operations with those of Proton was unlikely to deliver significant economies of scale or synergies to the combined business.
As such, given the financial and operational implications and the future potential losses for Proton, the decision was taken by the board to dispose of this investment, with the buyer assuming all the liabilities.
As stated before, the disposal was motivated purely by operational, commercial and financial considerations. At the time, there was a very real possibility that MV Agusta will fall into bankruptcy, with significant commercial, financial and reputational risk to Proton.
As such Proton had acted in a prudent manner to concentrate its financial resources in restructuring the company and develop its core business, focusing on creating new models for Proton.
Therefore, as far as Proton is concerned, the disposal of its interest in MV Agusta was a sound and considered move.