Bain, GIC to acquire part of honda stake in Hero JV

Private equity firm and Government of Singapore Investment Corporation(GIC), a sovereign fund owned by the government, are close to picking up part of Honda’s 26 per cent equity stake in the world’s largest two-wheeler manufacturer Hero Honda.

The two funds have left behind many other contenders, which had shown interest in the deal, including PE funds like KKR, Carlyle, Warburg Pincus and TPG, among others, say sources. They also say that the deal is being negotiated at a price of around Rs 1,500 to Rs 1,600 a share.

A Bain Capital spokesperson said: "As a policy, we do not confirm or deny speculations on deals." executives could not be contacted. The deal is expected to be completed within a few days.

Terminating the 26-year old joint venture with Honda Motor Corporation, the Munjals’ promoted Hero Group had, in December last year, announced it would buy Honda’s 26 per cent stake in Hero Honda for an undisclosed amount. The Munjals also own 26 per cent share in the company. According to merchant bankers, the Honda stake was valued at around $2 billion, but the deal was signed by the Munjals at an undisclosed discount over the market price.

Hero needed to raise the funds for buying Honda’s 26 per cent. The BAIN/GIC deal is part of the latter arrangement. The Hero Group may, at a later stage, look to buy the stake back from BAIN/GIC.

Hero Honda's share prices have been falling from Rs 2,020, a monthly high in January, to close at Rs 1,630.50 at the Bombay Stock Exchange on Monday. The share fell by over 1.6 per cent at close over last Friday. The two parted ways after the Japanese automaker decided to concentrate in India through its fully-owned subsidiary Honda Motorcycle & Scooter India Ltd. The company, set up in 1999, essentially to make scooters, also introduced motorbikes a few years ago. However, it has been keeping away from the large 100-cc segment, in which Hero Honda reigns supreme.

A new definitive licensing agreement was signed by the two partners on January 24, which pertains to both existing and new products that the company will offer in the domestic market, once HMC exits the joint venture. Under the new arrangement, Hero Honda would continue to pay royalty to Honda at the current levels. The company is likely to pay 2.75-2.85 per cent of net sales as royalty to HMC in the current financial year. The royalty payments for the group would go down beyond 2014, with royalty on existing products coming to an end at that time.

After the agreement, the Hero Group is also looking at initiating work to develop its own research and development capabilities. Ravi Sud, chief financial officer, Hero Honda had earlier said, “We would focus on building our R&D besides Honda would provide us with some new models. If the need arises we can also scout for partners globally to source technology.”

The company would start work to put in place a distribution network to export products overseas in the coming months. Anil Dua, senior vice-president (marketing and sales), Hero Honda, had said, “We have so far been a national player with limited global presence. We will now look at rapidly tapping opportunities worldwide. In our existing exports’ market we will use the joint brand during the transition period for our products. In new geographies, we will project our own brand.” The company is looking at exploring markets in South Africa, South Asia, Latin America, West for exporting products.

image
Business Standard
177 22
Business Standard

Bain, GIC to acquire part of honda stake in Hero JV

BS Reporters  |  New Delhi 



Private equity firm and Government of Singapore Investment Corporation(GIC), a sovereign fund owned by the government, are close to picking up part of Honda’s 26 per cent equity stake in the world’s largest two-wheeler manufacturer Hero Honda.

The two funds have left behind many other contenders, which had shown interest in the deal, including PE funds like KKR, Carlyle, Warburg Pincus and TPG, among others, say sources. They also say that the deal is being negotiated at a price of around Rs 1,500 to Rs 1,600 a share.

A Bain Capital spokesperson said: "As a policy, we do not confirm or deny speculations on deals." executives could not be contacted. The deal is expected to be completed within a few days.

Terminating the 26-year old joint venture with Honda Motor Corporation, the Munjals’ promoted Hero Group had, in December last year, announced it would buy Honda’s 26 per cent stake in Hero Honda for an undisclosed amount. The Munjals also own 26 per cent share in the company. According to merchant bankers, the Honda stake was valued at around $2 billion, but the deal was signed by the Munjals at an undisclosed discount over the market price.

Hero needed to raise the funds for buying Honda’s 26 per cent. The BAIN/GIC deal is part of the latter arrangement. The Hero Group may, at a later stage, look to buy the stake back from BAIN/GIC.

Hero Honda's share prices have been falling from Rs 2,020, a monthly high in January, to close at Rs 1,630.50 at the Bombay Stock Exchange on Monday. The share fell by over 1.6 per cent at close over last Friday. The two parted ways after the Japanese automaker decided to concentrate in India through its fully-owned subsidiary Honda Motorcycle & Scooter India Ltd. The company, set up in 1999, essentially to make scooters, also introduced motorbikes a few years ago. However, it has been keeping away from the large 100-cc segment, in which Hero Honda reigns supreme.

A new definitive licensing agreement was signed by the two partners on January 24, which pertains to both existing and new products that the company will offer in the domestic market, once HMC exits the joint venture. Under the new arrangement, Hero Honda would continue to pay royalty to Honda at the current levels. The company is likely to pay 2.75-2.85 per cent of net sales as royalty to HMC in the current financial year. The royalty payments for the group would go down beyond 2014, with royalty on existing products coming to an end at that time.

After the agreement, the Hero Group is also looking at initiating work to develop its own research and development capabilities. Ravi Sud, chief financial officer, Hero Honda had earlier said, “We would focus on building our R&D besides Honda would provide us with some new models. If the need arises we can also scout for partners globally to source technology.”

The company would start work to put in place a distribution network to export products overseas in the coming months. Anil Dua, senior vice-president (marketing and sales), Hero Honda, had said, “We have so far been a national player with limited global presence. We will now look at rapidly tapping opportunities worldwide. In our existing exports’ market we will use the joint brand during the transition period for our products. In new geographies, we will project our own brand.” The company is looking at exploring markets in South Africa, South Asia, Latin America, West for exporting products.

RECOMMENDED FOR YOU

Bain, GIC to acquire part of honda stake in Hero JV

Private equity firm Bain Capital LLC and Government of Singapore Investment Corporation(GIC), a sovereign fund owned by the government, are close to picking up part of Honda’s 26 per cent equity stake in the world’s largest two-wheeler manufacturer Hero Honda.

Private equity firm and Government of Singapore Investment Corporation(GIC), a sovereign fund owned by the government, are close to picking up part of Honda’s 26 per cent equity stake in the world’s largest two-wheeler manufacturer Hero Honda.

The two funds have left behind many other contenders, which had shown interest in the deal, including PE funds like KKR, Carlyle, Warburg Pincus and TPG, among others, say sources. They also say that the deal is being negotiated at a price of around Rs 1,500 to Rs 1,600 a share.

A Bain Capital spokesperson said: "As a policy, we do not confirm or deny speculations on deals." executives could not be contacted. The deal is expected to be completed within a few days.

Terminating the 26-year old joint venture with Honda Motor Corporation, the Munjals’ promoted Hero Group had, in December last year, announced it would buy Honda’s 26 per cent stake in Hero Honda for an undisclosed amount. The Munjals also own 26 per cent share in the company. According to merchant bankers, the Honda stake was valued at around $2 billion, but the deal was signed by the Munjals at an undisclosed discount over the market price.

Hero needed to raise the funds for buying Honda’s 26 per cent. The BAIN/GIC deal is part of the latter arrangement. The Hero Group may, at a later stage, look to buy the stake back from BAIN/GIC.

Hero Honda's share prices have been falling from Rs 2,020, a monthly high in January, to close at Rs 1,630.50 at the Bombay Stock Exchange on Monday. The share fell by over 1.6 per cent at close over last Friday. The two parted ways after the Japanese automaker decided to concentrate in India through its fully-owned subsidiary Honda Motorcycle & Scooter India Ltd. The company, set up in 1999, essentially to make scooters, also introduced motorbikes a few years ago. However, it has been keeping away from the large 100-cc segment, in which Hero Honda reigns supreme.

A new definitive licensing agreement was signed by the two partners on January 24, which pertains to both existing and new products that the company will offer in the domestic market, once HMC exits the joint venture. Under the new arrangement, Hero Honda would continue to pay royalty to Honda at the current levels. The company is likely to pay 2.75-2.85 per cent of net sales as royalty to HMC in the current financial year. The royalty payments for the group would go down beyond 2014, with royalty on existing products coming to an end at that time.

After the agreement, the Hero Group is also looking at initiating work to develop its own research and development capabilities. Ravi Sud, chief financial officer, Hero Honda had earlier said, “We would focus on building our R&D besides Honda would provide us with some new models. If the need arises we can also scout for partners globally to source technology.”

The company would start work to put in place a distribution network to export products overseas in the coming months. Anil Dua, senior vice-president (marketing and sales), Hero Honda, had said, “We have so far been a national player with limited global presence. We will now look at rapidly tapping opportunities worldwide. In our existing exports’ market we will use the joint brand during the transition period for our products. In new geographies, we will project our own brand.” The company is looking at exploring markets in South Africa, South Asia, Latin America, West for exporting products.

image
Business Standard
177 22
Widgets Magazine

More News

Widgets Magazine
Widgets Magazine

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard