Harley-Davidson's Stock Is Exploding - Is a Massive Buyout Coming?

Does someone want to ride Harley-Davidson (HOG) off into a land of private ownership?

Shares of the legendary motorcycle maker exploded as much as 15% on Friday amid speculation of potential takeover interest by private equity. The chatter has KKR & Co. expressing interest in Harley-Davidson. A spokesman for Harley-Davidson didn't immediately return an email request for comment. 

The unusual move mirrors one back in December due to takeover speculation. A Harley spokesman told TheStreet at the time, "Harley-Davidson has periodically been the subject of marketplace speculation of various sorts, and it's our longstanding practice not to comment on market rumors and speculation."

But it's not a completely far-fetched idea that a private-equity deal for Harley could go down.  

Before Friday's pop, shares of the storied bike manufacturer were down about 30% since Jan. 1, 2015, amid a disappointing stretch of sales. But the company has built up significant brand equity through the years that is likely not being reflected in its stock valuation, and has worked diligently to re-tool its manufacturing facilities to more efficiently produce bikes. Further, Harley's debt-to-equity ratio is relatively low at 52%, giving a would-be financial buyer room to add debt to complete a big transaction.

From Harley's perspective, it may be open to offers as a way to leave Wall Street's scrutiny in what has been several challenging quarters. The operating environment for Harley-Davidson is one that could be best characterized as ultra-competitive. Japanese motorcycle manufacturers such as Honda, Suzuki and Kawasaki have been able to price their bikes more competitively in the U.S. for more a year due to the yen's weakness.

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