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Carlyle, TPG in line for stake in Hero Honda

Private equity firms Carlyle and TPG are set to buy up Honda’s stake in Indian motorcycle company Hero Honda, according to reports.

The Munjal family, who set up the Hero Group, are set to buy back the Japanese auto giant’s 26 per cent holding, before selling most of it on to the two firms.

It is expected that the US private equity firms will end up paying $1.4bn for some 18 per cent of Hero Honda, a discount on the market price of the shares but more than the Munjals will pay Honda.

The business has been run as a joint venture between Honda and the Hero Group for 26 years, but the two will become competitors once the Japanese company pulls out. Honda plans to ramp up the size of its subsidiary, Honda Motorcycle and Scooter India.

Honda’s exit has been held up by the objections of some shareholders, given talk of increased payments to Honda for the use of its technology.

In September other private equity firms, including KKR, Warburg Pincus and Bain Capital, were reported to be interested in the deal, but the only Carlyle and TPG are now said to be in the running.

Hero Honda is the world’s largest maker of motorcycles, producing 3.3 million bikes in fiscal 2009.

Source: Alt Assets

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