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A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the

Hero Honda Motors Limited At Dharuhera India. Hero is the brand name used by the Munjal brothers

for their flagship company Hero Cycles Ltd. Manjul family and Honda group both own 26% stake in

the Company. However the Hero Honda group is set for a split in the end of 2010. After the split the

Munjal family will buy Honda Motors 26% stake for around $1 billion, or a little less than half the

current value of the stake in the stock market.[1]

The Japanese auto major will exit the JV through a series of offmarket transactions by giving the

Munjal familythat currently holds 26% stake in the companyan additional 26%. Honda, which also

has an independent fully owned twowheeler subsidiaryHonda Motorcycle and Scooter India

(HMSI)will exit Hero Honda at a discount and get over $1 billion for its stake. The discount will be

between 30% and 50% to the current value of Honda's stake as per the price of the stock after the

market closed on Wednesday.[2]

The Munjal family plans to compensate Honda through high royalty payouts, which could double to

nearly 6% of net sales. However, key financial institutions have objected to this move, saying that the

deal could favour the Munjals but be detrimental to other shareholders.[2]

Contents

[hide]

1 Difference

2 Arrangement

3 Future of the Joint

4 References

[edit]Difference

The rising differences between the two partners that gradually emerged as an irritant. Differences had

been brewing for few years before the split over a variety of issues, ranging from Honda's reluctance

to fully and freely share technology with Hero (despite a 10-year technology tie-up that expires in

2014) as well as Indian partner's uneasiness over high royalty payouts to the Japanese company.

Another major irritant for Honda was the refusal ofHero Honda (mainly managed by the Munjal

family) to merge the company's spare parts business with Honda's new fully owned subsidiary Honda

Motors India (HMI).

[2]

[edit]Arrangement

As per the arrangement, it will be a two-leg deal. In the first part, the Munjal family, led by Brijmohan

Lal Munjal group, will form an overseas-incorporated special purpose vehicle (SPV) to buy out

Honda's entire stake, which will be backed by bridge loans. This SPV would eventually be thrown

8/4/2019 Split of Hero Honda in India

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open for private equity participation and those in the fray include Warburg Pincus, Kohlberg Kravis &

Roberts (KKR), TPG, Bain Capital and Carlyle.[3]

[edit]Future of the Joint

Honda will continue to provide technology to Hero Honda motorbikes until 2014 for existing as well as

future models.[4]