Hero MotoCorp acquires 49.2% in US superbike maker EBR for $25 m
01 Jul 2013
Hero MotoCorp Ltd, the world's largest two-wheeler maker, has agreed to acquire 49.2 per cent equity in US-based superbike maker Erik Buell Racing (EBR) for $25 million in its first overseas acquisition.
Hero Motocorp, which already has a technology sharing agreement with EBR, has already invested $15 million in the racing bike maker as the first tranche of the payment towards the acquisition. The transaction is being carried out through the US unit of Hero MotoCorp, the company said in a release.
"As part of the agreement, Hero MotoCorp's US unit has invested $15 million in Erik Buell on June 28, and the remaining $10 million will be paid within nine months," the release said.
"This is the first time Hero MotoCorp has gone out of the country to buy an equity. It is the first step in globalisation of Hero MotoCorp," said Pawan Munjal, managing director and chief executive of the company.
As per the agreement the, two companies will promote the sale and marketing of each other's products. The agreement will also facilitate marketing of Hero motorcycles in the Western countries.
The equity partnership will also give Hero MotoCorp representation on the EBR board with two directors and one observer.
Hero MotoCorp, which parted ways with its Japanese partner Honda in December 2010, said it has lined up new products for festival season launch around Diwali.
The company, Munjal said, is also looking at launching green products by 2014.
Hero MotoCorp is targeting new markets in Africa and Latin America to ramp up exports to 350,000 units in the current financial year from 200,000 units in the previous financial year.
East Troy, Wisconsin-based Erik Buell Racing has technology partnership with several companies in Europe and the American continent. The company, which proposes to engineer global performance integration into every model, has announced plans to build 100 of its inaugural 1190RS model superbikes.
Shares of Hero MoroCorp Ltd gained over 1 per cent at Rs1,679 in morning trade today, after the two-wheeler maker said that its wholly owned unit in the US has agreed to buy a 49.2 per cent stake in Erik Buell Racing for $25 million.