Hero Bids Honda good bye

Now time has come when the historical joint venture comes to an end. Honda Motor from Japan is soon to meet the Hero group of India for final hand shake as a gratitude to successful collaboration of the two companies. The successful association is lasting from past 25 years and the company has achieved great heights working together and has earned a tag of country's largest two-wheeler company.

The separation process is active since past few months and now the two companies are at a position to step in the final stage. The companies have been under deep discussions of future ownership status in company.

The meeting will be organised overseas and now speculations are made that Honda will make a counter offer to Hero Group. The Japanese company is not very happy with the extent of discount claimed by Munjal's and in such a situation, the company may come up with some other counter offer.

If we talk about the agreement, it says that if one partner wants to exit the company, the other has right to buy its shares at a 30-40% discount and in case offer is not accepted, then the other company has to purchase the shares at a premium. Now if we consider Monday's stock price, the value of 26% of Hero Honda shares will amount 10,000 crore. The Munjal's offer to buy these shares at a discount of 40% discount is not sounding good to Japanese partner. HMSI (Honda Motorcycles and Scooters) will come in direct competition with Hero group as it has plans to enter the 100 cc segment which is ruled by Hero Honda at present.

The differences between two companies started from the day when Hero Honda started demanding more supplies from HMSI which became difficult in increasing demand. The sales were too high in case of Splendor and Passion, such that it became difficult to manage the demand.