Private equity firms eye 15 per cent stake in Hero Honda

A group of private equity firms are planning to buy a 15 per cent stake in the Hero Honda joint venture, as Honda, the world's largest manufacturer of motorcycles seeks to reduce its stake in its 26 year-old Indian JV with the Hero Group.

According to various media reports, global private equity firms, Kohlberg Kravis Roberts & Co, TPG Capital, Carlyle Group and Bain Capital are reportedly vying to acquire at least 15 per cent interest, valued at $1.1 billion, of Honda's 26 per cent stake in Hero Honda Motors.

Two of the US-based private equity firms, TPG Capital and the Carlyle Group have already moved ahead and have spoken to Honda, but the Japanese company is reportedly looking for a better offer.

Hero Group promoters, the Munjal family, which holds a 26.1 per cent stake in Hero Honda, may buy 5 per cent of Honda's stake in the JV.

Hero Honda currently has a market capitalisation of about Rs348.5 crore ($7.6 billion), valuing Honda's 26 per cent stake at approximately Rs92.28 crore ($2 billion).

Tokyo-based Honda has been in talks for over a year with the Delhi-based Hero Group to reduce its 26 per cent stake in the JV, which is India's largest motorcycle maker, holding a market share of 41.35 per cent.

The private equity firms have shown interest in buying Honda's stake as both the Hero Group and Honda are near to finalising an agreement where Honda is likely to extend its technology collaboration agreement beyond the current agreement that expires in 2014.

Honda had in June 2004 renewed its technology collaboration agreement with Hero Honda for 10 years.