Honda puts the brakes on Hero joint venture

HONDA Motor Co. has reached a basic agreement to dissolve its partnership in India’s Hero Honda Motors Ltd.

Meanwhile US private equity groups are set to buy a stake in Hero, with buy-out groups Carlyle and TPG helping the Munjal family, which controls the Indian company, to buy back Honda’s 26 per cent stake.

The cost is reportedly set at $1.4bn (£888m) – a discounted value as Hero Honda has a market capitalisation of around $7.6bn.

Once on its own, Honda will focus its resources on wholly owned subsidiary Honda Motorcycle & Scooter India Pvt, a Nikkei report said.

Honda and its Indian partner Hero Group will seek approval for the breakup from their respective boards of directors later this month.

The Japanese automaker could reap up to around 100bn yen (£767bn) from the sale of its shares in Hero Honda Motors, founded in 1984 with India’s Hero Group, Nikkei said.

The partners each took 26 per cent stakes in the venture, which became an emerging market foothold for Honda.

Honda will sell its entire stake in the motorcycle maker by as early as March, the report added.