Harley-Davidson Inc.'s stock shares rose more than 5 percent to $28.02 today on unsubstantiated rumors that the motorcycle maker is the target of a leveraged buyout.
Kohlberg Kravis Roberts & Company, a New York-based private equity firm, may be negotiating a takeover of the troubled Milwaukee motorcycle manufacturer, according to a report by the Reuters news service.
Officials from KKR and Harley both declined to comment on the rumor.
Trading was three times the normal volume in Harley shares today. Trading was also active in the options market, where investors bet the stock would climb higher over the next few weeks, according to Interactive Brokers.
The Great Recession has taken a toll on Harley, which reported a loss of $218.7 million in the fourth quarter of 2009. The company has warned investors that that 2010 will be "challenging."
Craig Kennison, an analyst covering Harley Davidson with Milwaukee-based Robert W. Baird & Co. Inc., said today's speculation seemed to be based on rumors.
He said Harley shareholders would likely be "enormously disappointed" with a $27 or $28 per share price. Harley's stock peaked at $75.87 per share in November 2006.
"I am one that sees a significant amount of value (in Harley) that the market does not appreciate," Kennison said. "I wouldn't be shocked if others saw a tremendous value in Harley Davidson. We're close to the bottom of the cycle for Harley. Management has been at the forefront of some meaningful changes and the company has not yet seen the fruits of those changes. I would be surprised to see a sale at that price when there is so much that's left on the table."
The cost cutting measures that Harley has made in recent years, including plant closures and layoffs, will make the company more profitable when the economy and sales rebound, Kennison said.
"We're at the beginning of the cycle, and I think investors have reason to be optimistic about the turnaround that (Keith) Wandell (Harley's CEO) is leading," he said.
Harley stock rises on takeover speculation
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