Sunday, October 17, 2010

Honda Motor prepares to exit Hero Honda

Honda Motor Company said that it is evaluating proposals for a deal which could even see it exiting from its joint venture with the Munjals of the Hero Group in Hero Honda, now the world's biggest two wheeler manufacturing company.

The proposal was made by the Munjals to Honda Motor. The latter's technology licensing agreement for the JV is to end only in 2014. Honda Motor has 26% stake in Hero Honda. The Munjals, with individual stakes and through a couple of investment companies, hold 26.21%. They have reportedly shown interest in buying a direct 6% stake from Honda in the company.

According to sources, senior executives from Honda Motor had flown to New Delhi last month to meet the Munjal family and discuss the proposed deal. In an interview Mr Tatsuhiro Oyama senior managing director Honda Motor Company said that "The (Munjal) family has its own intentions; we are considering them."

The Indian promoters are said to be talking to private equity companies, including Blackstone, KKR, Carlyle, Temasek and CD&R, to raise cash for funding the stake buyout. Sources said that the Hero Group was keen on funding the buyout of Honda's stake through debt and had kept the equity option as a final one.

Sources add that most of the PE companies approached by the Hero Group have not shown keen interest in the deal.

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