Merger forms $382M, Indy-based motorcycle parts company

Indianapolis-based holding company LDI Ltd. has tripled the employee count in its motorsports subsidiary and broadened its national reach with a deal for privately held Motorsport Aftermarket Group.

The purchase in May of a controlling interest in the California-based company amounts to a massive bet on the motorcycle parts business for the century-old firm run by the Lacy family.

LDI merged Motorsports Aftermarket Group, or MAG, with a motorsport distribution company it already owned, Tucker Rocky. Both companies sell aftermarket parts for motorcycles.

More than 2,250 people work for the new company, which makes and distributes performance parts for motorcycles through 30 brands. One brand, Vance and Hines, has a 142-person factory in Brownsburg. LDI expects employment numbers to stay the same, if not grow slightly.

Financial terms weren’t clear for the deal. But U.S. Securities and Exchange Commission records provide some hints.

LDI did not say how much it paid for 1,500-employee MAG, but the investment firm put a value of $382.5 million on the combined entity. The business will take the legal name Velocity Holdings but do business as Motorsport Aftermarket Group.

The new company roughly doubles the size of LDI’s existing motorcycle business, which produced a “substantial portion” of LDI’s 2013 revenue of more than $1 billion, LDI Chairman Andre Lacy said.

A previous investment deal for MAG, the acquired company, suggests the firm likely fetched more than $100 million. The company’s private-equity owners paid almost $100 million two years ago to acquire control, SEC records show.

LDI took over MAG from major West Coast private-equity firm Leonard Green and Partners, which is known for significant investments in brands such as J. Crew, Petco and Sports Authority.

Officials at Leonard Green, which maintains a minority stake in the merged company, did not respond to messages seeking comment.

J.A. Lacy, president of LDI and Andre Lacy’s son, took over as CEO of the new company. MAG’s existing CEO will remain with the firm as president of its product, media and online-retail divisions.

Tucker Rocky distributed MAG products before the merger. However, the wholesaler did not have distribution rights for all MAG products. The deal will grant Tucker Rocky full access to MAG lines, but the wholesaler will continue to distribute for other manufacturers as well, Andre Lacy said.

The merged company expands its reach in a fractured aftermarket-parts industry that does not have any dominant players, said Chicago motorsports business consultant Timothy Frost.

“There are a number of companies out there. There really is no major, biggest player within a market like that,” Frost said.

LDI channels its investments into logistics and distribution companies in fractionalized industries. (The company also owns 800-employee OIA Global Logistics, based in Portland, Ore.)

The firm has always acquired majority stakes, if not full ownership. It typically invests for 15 years or more in companies that report between $2 million and $10 million in EBITDA.

LDI—short for Lacy Diversified Industries—first dove into the power sports business in 1989, when it acquired Tucker Rocky, which is headquartered in Fort Worth, Texas.

“I have to admit, it was not something that I immediately embraced,” Andre Lacy said. But the diverse nature of the industry won over Lacy, who also became a motorcycle owner himself.

Tucker Rocky grew through several acquisitions before the merger. LDI folded in Biker’s Choice, Malcom Smith Racing, Answer Racing and Firstgear into its power sports arm of business over the past 20 years. The company also developed three of its own brands: Speed & Strength, Quadboss and BikeMaster.

The addition of MAG taps a $6.9 billion industry for motorcycle, bike and parts manufacturing, according to research firm IBISWorld.

Revenue in the industry has grown an average 4.4 percent per year since 2009, when the market crashed with the rest of the economy. Sales will coast over the next few years, inching up 0.9 percent between 2014 and 2019, IBIS reported in April.

Men between ages 40 and 55 account for the most revenue. But they are buying fewer motorcycles and parts as they grow older. Younger consumers, on the other hand, tend to prefer cheaper bicycles.

“In the five years to 2019, the industry is expected to reorganize its efforts to attract new customers, penetrate emerging markets and achieve more efficient production capacity,” IBIS wrote in its report.

“Industry players are increasingly concentrating on marketing to women, younger men and minority groups. Higher disposable income and an increase in the number of younger customers will enable moderate revenue gains, but this is not expected to offset the loss in demand from aging baby-boomer males.”