Three U.S. PE firms eye Indian motorcycle investment

Three U.S. private equity firms, Carlyle, Kohlberg Kravis Roberts & Co and Warburg Pincus, are negotiating a possible purchase of a 15 to 18 percent stake in Hero Honda Motors, the top Indian motorcycle manufacturer, according to reports. Japan’s Honda Motor holds 26 percent of the company.

(Reuters) – U.S. private equity firms Carlyle, Kohlberg Kravis Roberts & Co and Warburg Pincus are in talks to acquire an effective 15-18 percent stake in Hero Honda Motors, India’s top motorcycle maker, the Economic Times reported on Monday.

The private equity firms would buy the stake as part of a two-step transaction that could see Japan’s Honda Motor, which holds 26 percent of Hero Honda, exiting the Indian company, the newspaper said citing two unidentified people familiar with the deal.

In the first leg of the deal, B.M. Munjal-owned Hero group would buy out Honda’s stake through a special purpose vehicle (SPV) with bridge loans taken from banks. The private equity firms would then buy 60-70 percent stake in the SPV.

While the structure has largely been finalised, the deal value is yet to be decided upon, the paper said.

If successful, the Munjals will hold up to 36 percent in Hero Honda directly and indirectly, while the private equity funds will own an indirect stake of 18 percent, it said.

Emails sent to Honda, a Hero group representative and KKR went unanswered, the paper said, while officials at Warburg Pincus and Carlyle declined comment.

Officials at these firms could not be reached by Reuters for comment immediately.