Honda-Siel battle ends with buyout

Shrirams sell stake to Japanese auto giant for Rs 180 crore

The uneasy partnership between Honda Motor Corporation (HMC) and the Siddharth Shriram-promoted Shriram Industrial Enterprises Ltd (Siel) has come to an end, with the Japanese auto major on Friday saying it has bought out the latter’s stake in its Indian subsidiary for Rs 180 crore.

The announcement brings to an end the 17-year-old joint venture, Honda Siel Cars India (HSCI), in which Siel through Usha International Ltd (UIL) had 3.16 per cent stake. “Usha, Honda Siel Cars India Ltd and Honda Motor Company, Japan, after working together for 16 years to develop Honda Siel Cars India Ltd have agreed to end their joint venture,” UIL said in a statement. According to the agreement reached between the two companies, Honda Motor Co has “purchased all of the shares (18 million) that Usha held in Honda Siel Cars India Ltd”. The stake sale had been negotiated at a price of Rs 100 a share, inclusive of a non-compete fee, the statement added.

 

With the stake sale, Siddharth Shriram ceased to be a director and the chairman of HSCI, UIL said.

AUTO SPLITS
Instances of joint ventures splitting in the Indian auto sector

HONDA-SIEL (2012)
Honda buys out Siel’s 3.16% stake in the company
* Rs 180 crore

FORCE MOTORS-MAN (2011)
MAN bought out Force Motors’ 50% stake
* Rs 1,050 crore

MAHINDRA-RENAULT (2010)
Mahindra bought out Renault’s 49% stake

HERO HONDA (2010)
Hero buys out Honda’s 26% stake
* Rs 3,841.83 crore

MARUTI SUZUKI (2007)
The govt sells its 18.28% stake in Maruti Udyog Ltd to Indian financial institutions in May 2007 after a battle with the Japanese partner

TVS SUZUKI (2001)
TVS buys out Suzuki’s 25.97% stake
* Rs 9 crore

YAMAHA ESCORTS (2001)
Yamaha buys out Escorts’ 26% stake in the company
* Rs 70 crore

KINETIC HONDA (1998)
Kinetic buys out Honda’s 51% stake
* Rs 35 crore

* Deal value                                                                                   Source: Industr

In a separate statement, HSCI said, “UIL, which held 3.16 per cent shares in HSCI, had shown an interest in divesting from the joint venture to be able to focus and strategically invest to expand their own core business. Therefore, based on mutual consent, UIL has sold its shares to the partner Honda Motor Co, Japan.” HSCI will now be a 100 per cent Honda subsidiary in India.

“The process of changing the company name and other formalities will be completed over the next few months,” the car maker said.

The decision comes after months of the two partners waging a bitter battle over the valuation of UIL’s stake. HSCI had appointed Ernst & Young to value it. The valuation it arrived at (Rs 63.60 a share) was nearly a third of the Rs 182 a share arrived at by KPMG, which had done the valuation for UIL. UIL had objected to the valuation done by Ernst & Young, saying it was lower despite the consultant having taken into consideration an additional equity infusion of an estimated Rs 3,200 crore in Honda Siel.

The controversy erupted after Siel declined to participate in an equity capital-raising programme as proposed by Honda in October last year.

“Usha feels that it was inevitable that some day the parting would come because automobiles are not really Usha’s direct business,” UIL said in its statement on Friday. Usha had a relationship with the Japanese auto major since 1985, when Honda Siel Power Products (formerly known as Shriram Honda Power Equipment Ltd) was started. The group became Honda’s partner in 1995.

Honda, which commenced sales operations in India with flagship sedan City in 1998, has seen market share dip over the decade due to increased competition from global players. The company’s lack of diesel engines has further added to its woes in the domestic market. In the last financial year, the company’s sales declined 8.47 per cent to 54,427 vehicles.