Hero MotoCorp Buys 49.2% Stake in Erik Buell Racing for $25 Million

Google+ Pinterest LinkedIn Tumblr

A plethora of Indian Financial publications are reporting that Hero MotoCorp has bought a 49.2% stake in Erik Buell Racing for $25 million. Hero MotoCorp is India’s largest two-wheel manufacturer, and for a year now has partnered with Erik Buell Racing for technical development, as well as sponsoring the American company’s AMA Pro Road Racing team for the past two seasons.

Today’s news confirms numerous rumors we have heard about the Hero investing in EBR. Acquiring only 49.2% of Erik Buell Racing, Hero has only a minority stake in EBR, and while we cannot confirm the information, we would imagine that the odd 49.2% ownership was done to keep Erik Buell as the majority shareholder in his company.

“The equity partnership with EBR is reflective of our long-term vision of transforming Hero MotoCorp to a truly global two-wheeler major with footprints spread across continents, offering a wide range of technologically-advanced two-wheelers,” said Hero MotoCorp CEO Pawan Munjal while talking to the Economic times.

As we go on spreading our footprint in new international markets, we will look at having extended centres of our own R&D at multiple locations around the world, developing two-wheelers for our global customers. Our fully-owned new overseas subsidiaries such as the one in the US and in Netherlands will play important roles in our future overseas acquisitions and investments,” added Munjal.

Making the transaction through its wholey-owned American subsidiary HMCL, Hero MotoCorp picks up two seats on Erik Buell Racing’s Board of Directors, along with one observer position. Despite those board changes, Erik Buell will remain the company’s Chairman and CEO.

According to reports from India, Hero has paid $15 million up-front, and will invest $10 million within the next nine months. The investment reportedly is to help Hero continue its R&D efforts, helping fill the void left behind from Hero and Honda’s break-up, as Hero plans to be free of Honda’s technology (and licensing fees) by 2014.

Hero must have liked what they have seen so far from its short partnership with Erik Buell Racing to make the investment, and value the company at just over $50 million. Though now the real question for Buelltisti is how do they feel about their “American sport bike brand” being largely owned by an Indian company?

Source: Reuters, Economic Times, & Business Standard; Photo: © 2011 Jensen Beeler / Asphalt & Rubber – Creative Commons – Attribution 3.0