Hero MotoCorp to Buy Minority Stake in Eric Buell Racing

India’s largest two wheeler company Hero Motocorp. will buy a minority stake in US motorcycle firm Erik Buell Racing (EBR) for an undisclosed amount according to news reported by Economic times.  The deal is likely to happen in the early next financial year. Hero Motocorp did not disclose any deal terms which they are planning to negotiate.

Hero MotoCorp MD and CEO Pawan Munjal said. “We have a flexible free-flowing pact with EBR, which would be developed into a equity partnership. The move is aimed at securing uninterrupted technological support from the US racing motorcycle maker once associated with iconic brand Harley-Davidson. By buying a stake, Hero can have a higher say in the US marquee firm and use the partnership to get a foothold in overseas markets. As we turn global, which is our long cherished aim, EBR is a strategic fit that will help us gain traction in overseas markets. We are open to all options as we move into being a diversified automotive company.”

EBR chief promoter Erik Buell said “We would look forward to have both technological alliance and partnership with Hero Moto-Corp in the future. A marriage would lead to huge synergies in the long-term. EBR has an annual capacity of 15,000 units. Hero has not ruled out more such partnerships.”

It seems that Hero Motocorp. is now aggressively acquiring stake in foreign companies to develop its own R&D technologies. Such deals will give company access to technologies which are difficult to develop in short period of time. Also, such foreign companies are available at fair price while Hero Motocorp is a cash rich company and has lots of extra fund to deploy. Such deals are also giving an opportunity to access foreign market which would be more difficult in the absence of partner.

– Mahavir Kothari