Honda sells stake in Hero Honda

Honda has agreed the sale of it's 26% stake in Hero Honda Motors, proceeding with a progressive detachment of it's Indian operation from the Hero Group.

Although neither party has disclosed financial details of the deal, Honda's percentage of the company is worth in the region of $2 billion of the overall $7.4 billion valuation. Hero Honda is the largest motorcycle company in India, and the world.

The joint venture was formed in 1984, in response to Indian legislation which prevented foreign companies establishing subsidiaries in the country without part ownership by a native company. These rules were later relaxed, leading to the formation of Honda Motorcycle & Scooter India in 1999, which established Honda's operation on an independent basis.

The split will allow the two groups to operate in the market separately, in line with the rapid expansion of the Indian motorcycle market (now the world's second largest), into which notably BMW and Harley-Davidson have recently committed. Hero will continue to pay royalties to Honda over a transitional period, decreasing year on year. Speculation has suggested that the expansion of Honda's independent unit has put strain on the partnership in recent years, combined with a changing market, has precipitated the split.