Hero Honda Demerger
Table of Contents
1. ABSTRACT 3 2. INTRODUCTION 4 3. MATERIALS ANS METHODS 5 4. ANALYSIS 5 5. Conclusion 14 6. References 15
1. ABSTRACT
THE JOINT VENTURE
A joint venture between Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera Haryana. Hero is the brand name used by the Munjal brothers for their flagship company Hero Cycles Ltd. Honda is world’s largest selling two wheeler company based in Japan. Munjal family and Honda group both own 26% stake in the joint venture Hero Honda motor Corporation. However the Hero Honda group was set for a split at the end of 2010. After the split Munjal family will buy Honda Motor’s 26% stake for around $1 billion, or a little less than half the current value of the stake in the stock market.
The Japanese auto major will exit the JV through a series of off market transactions by giving the Munjal family an additional 26% share. Honda, which also has an independent fully owned two wheeler subsidiary (Honda Motorcycle and Scooter India (HMSI) will exit Hero Honda at a discount and get over $1 billion for its stake. The discount will be between 30% and 50% to the current value of Honda's stake as per the price of the stock.
The Munjal family plans to compensate Honda through high royalty payouts, which could double to nearly 6% of net sales. However, key financial institutions have objected to this move, saying that the deal could favour the Munjals but be detrimental to other shareholders.
Honda will continue to provide technology to Hero Honda motorbikes until 2014 for existing as well as future models. And after 2014 both companies Honda Motorcycle and Scooter India and Hero Motor corporation will compete with each other. Hero group will have full access of the overseas market as well and Honda group can compete full fledged in Indian market
In this project report we have analyzed strategic motives behind the deal, differences which led to the fall of joint
1. ABSTRACT 3 2. INTRODUCTION 4 3. MATERIALS ANS METHODS 5 4. ANALYSIS 5 5. Conclusion 14 6. References 15
1. ABSTRACT
THE JOINT VENTURE
A joint venture between Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera Haryana. Hero is the brand name used by the Munjal brothers for their flagship company Hero Cycles Ltd. Honda is world’s largest selling two wheeler company based in Japan. Munjal family and Honda group both own 26% stake in the joint venture Hero Honda motor Corporation. However the Hero Honda group was set for a split at the end of 2010. After the split Munjal family will buy Honda Motor’s 26% stake for around $1 billion, or a little less than half the current value of the stake in the stock market.
The Japanese auto major will exit the JV through a series of off market transactions by giving the Munjal family an additional 26% share. Honda, which also has an independent fully owned two wheeler subsidiary (Honda Motorcycle and Scooter India (HMSI) will exit Hero Honda at a discount and get over $1 billion for its stake. The discount will be between 30% and 50% to the current value of Honda's stake as per the price of the stock.
The Munjal family plans to compensate Honda through high royalty payouts, which could double to nearly 6% of net sales. However, key financial institutions have objected to this move, saying that the deal could favour the Munjals but be detrimental to other shareholders.
Honda will continue to provide technology to Hero Honda motorbikes until 2014 for existing as well as future models. And after 2014 both companies Honda Motorcycle and Scooter India and Hero Motor corporation will compete with each other. Hero group will have full access of the overseas market as well and Honda group can compete full fledged in Indian market
In this project report we have analyzed strategic motives behind the deal, differences which led to the fall of joint