Hero Honda Buyout Priced at $855 Million
Honda’s stake sold at 50% discount
Hero Investments, the Hero Group’s investment arm, is purchasing Honda’s share of the company for 38.42 billion rupees (US$855 million). Honda’s 26% share consisted of 51.92 million shares, so the sale price translates to about 739.97 rupees (US$16.47) a share, nearly half current market value. Shares in Hero Honda fell more than 3% after the buyout price was released. The buyout is expected to be completed on or around March 22.
Honda will continue to supply technology to the Hero Group under a royalty agreement until 2013. Hero Honda will be rebranded without the Honda name and the Hero Group is seeking other new products including reaching out to other manufacturers or possibly implementing diesel engine technology.
Hero Honda is the market leader in India, holding about half of the country’s motorcycle market. Hero’s market share is expected to shrink over the next few years as it weans itself off of Honda technology and other manufacturers (including Honda itself with its wholly-owned subsidiary Honda Motorcycle and Scooter India) increase their efforts in India.