Hero stake sale to fetch Honda $1.2bn

Japanese auto giant Honda has reached an agreement to dissolve its 26-year-old joint venture — Hero Honda — with the Hero Group by selling its entire stake in the Indian largest two-wheeler maker.

Honda Motor Co is expected to sell its entire 26 per cent stake in Hero Honda to its partner — the Munjals-promoted Hero Group. Honda will earn $1.2 billion from the sale, Kyodo reported quoting Japanese business daily Nikkei.

“Honda and Hero Group have reached the basic agreement this week to dissolve the partnership,” the daily said, adding that the two companies will seek a final approval from their respective board of directors later this month for the break-up.

The parting of ways comes 26 years after the joint venture was set up in 1984.

The Japanese firm will offload its entire stake by March next year and will no longer provide technical support to Hero Honda.

However, the two companies, which renewed the agreement for technology support from Honda to the venture in 2004, will let the pact run till its expiry in 2014, Nikkei said.

Honda proposes to focus its resources on the new wholly owned subsidiary Honda Motorcycle and Scooter India.

Hero Honda sold 4.5 million two-wheelers in the last fiscal, grabbing 48 per cent of the growing Indian two-wheeler market, which is the second biggest in the world after China.

Honda and Hero Group holds 26 per cent each in Hero Honda.

However, there has been market speculation that there is unease between the partners after the Japanese firm decided to enter the Indian two-wheeler market.