Reuters reported Tuesday that Harley-Davidson might be the target of a leveraged buyout, talk of which sent the company's stock up nearly seven percent to $28.35. By Wednesday, the stock fell to $28.18 while its trading volume was down about 75 percent.
The supposed suitor for H-D is global private equity firm Kohlberg Kravis Roberts (KKR). So far, the buyout talk is unsubstantiated; spokesmen from both KKR and H-D declined to comment on what they called "market speculation."
Financial industry insiders mostly downplayed the buyout "rumors," Reuters reported.
"There's been a rumor a day among a lot of value names for the last week," says Peter Zuger, a mutual fund advisor for Touchstone Mid Cap Value Fund, which owns Harley shares. "I don't know which ones are real and which ones aren't." Due to H-D's cost cutting measures and its current depressed state, it makes sense that a private equity buyer like KKR is interested in the motor company, he says. Zuger's company took advantage of the speculation to pare its H-D holdings.
A leveraged buyout is also known as a "hostile takeover," where the buyer mostly uses debt to purchase another company. Assets of the purchased company can be used as collateral to secure funding.
In other H-D news, the company recently donated $1.4 million in fixtures, tables, flooring, lighting and wall components from its shuttered Buell factory to the Milwaukee Institute of Art & Design, according to The Business Journal of Milwaukee.