Harley-Davidson has negotiated an early end to its Canadian distribution deal with Fred Deeley Imports and will launch a new wholly-owned subsidiary in early August. Harley-Davidson had previously announced it would not renew its distribution agreement with Deeley, which was set to lapse on July 31, 2017, but the two sides sought an earlier end.
Deeley has been Harley-Davidson’s exclusive Canadian distributor since 1973 but in recent years, Harley has been moving towards direct distribution in key foreign markets including Italy, Brazil, Australia and the Scandinavian countries. The two sides expect to finalize their divorce on or around Aug. 4 when Harley-Davidson will open its new subsidiary to be called Harley-Davidson Canada.
Under the terms of the agreement, H-D Canada will pay Deeley $50 million to close the deal plus approximately $15 million to purchase certain inventory and accounts receivable. The subsidiary will compensate Deeley for certain expenses and liabilities including employee severances.
“Over the last 40 years, Harley-Davidson has had a strong, mutually beneficial relationship with the Deeley organization,” says Mike Kennedy, vice president and managing director of Harley-Davidson North America. “We will continue working closely with the Deeley team and the independent dealer network throughout the transition to build on this solid foundation. We remain focused on growing the business, investing in the Harley-Davidson brand and keeping our customers at the center of all that we do.”
In filings submitted to the U.S. Securities and Exchange Commission, Harley-Davidson says it expects to record higher revenues from dealer wholesale pricing but higher operating costs as a result of becoming a direct distributor.
Anoop Prakash has been appointed to the role of managing of director for the new subsidiary. He had previously performed the same role for Harley-Davidson India. H-D Canada will operate out of Concord, Ontario, just north of Toronto.
Deeley co-founder and majority owner Don James is currently the longest-serving member of Harley-Davidson’s board of directors. James was recently re-elected to the board and will be up for election again in 2016.