Munjals—owners of two-wheeler maker Hero Honda have set up a special purpose vehicle (SPV) in order to acquire Japan's Honda Motor’s 26% stake, reports CNBC-TV18’s Kritika Saxena quoting sources.
Munjals would control the SPV with 51% stake while the balance will be with investors including private equities, who would get effective stake of 12%.
It is being learnt that Hero and private equity firm KKR are in talk to buy over 6% of the effective stake with the latter negotiating for a larger share.
While the Munjals prefer to limit investors in SPV to maximum two, it is being learnt that Blackstone, Carlyle, Clayton Dubilier & Rice (CD&R) and other PE players are all in talks. However investors remain apprehensive at the current valuations. “The current price is not discounting life after Honda exit. PEs see Rs 1,300-1,500 a share as a fair value post exit.”
Though the timeline for the transaction remains indefinite, sources say the exit is imminent. Both Honda and the Munjals denied the exit.
Defending the 48% market share Hero Honda enjoys in the two-wheeler segment would be a key concern post Honda’s exit. Also, lack of captive research and development is a big disadvantage for the company according to sources. However the company may save 2.5-3% of revenue as royalty to Honda.
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