India's largest two-wheeler maker Hero Group has ended its 26 year old joint venture with the Japanese Honda Motor Co, as the Indian partner agreed to buy out its Japanese counterpart for an undisclosed sum.
The decision to restructure the equity has been reached in a cordial and amicable manner...As per the MoU, Hero Group will buy the entire 26 per cent equity stake of Honda Motor in Hero Honda Motors Ltd (HHML) in a phased manner from two or more qualified promoters. Upon completion of the transaction, Hero Group will be the sole promoters of the company, the two-wheeler major said in a statement.
In 2009-10, Hero Honda sold 46 lakh two-wheelers, capturing 48 per cent of the Indian two-wheeler market, which is the second biggest in the world after China.
This is the most important announcement I have made in the last 25 years... The board has approved an MoU between Hero Honda and Honda. The two companies will sign a definitive agreement within the next few weeks. Now, with this new arrangement, we are set to charter new segments and geographies and develop new products. This marks the beginning of a revitalised journey of growth for the company and its people and business associates, HHML Managing Director and CEO Pawan Munjal said.
The two parties have signed a new licencing agreement which will replace their existing joint venture pact. As part of the deal the Indian partner will buy the entire stake of Honda in a phased manner amongst two or more qualified promoters at a discount.
Moreover, Hero Honda will continue to pay royalty at the current levels to Honda, while it will now be able to export two-wheelers and also develop its own R&D capabilities.
The Hero Group and Honda hold 26 per cent each in Hero Honda that started operations in 1984 to become the world's largest two-wheeler maker today.