Hero Cycles to buy 60% stake in Mifa
25 Aug 2014
The world's largest bicycle-maker by volume Hero Cycles, owned by the O P Munjal Group, has struck a deal with Germany's Mitteldeutsche Fahrradwerke (Mifa) to buy a 60-per cent stake in it for €19 million (Rs 152 crore).
The deal would enable Hero to access Mifa's high-end technology, especially in the e-bikes segment, and expand its market in Europe where it maintains a strong presence.
''Hero Cycles continues to look at acquisition and partnership opportunities across the globe which fit into our strategy of serving customers across all bike segments and price points,'' Hero said in a statement. ''The partnership will allow both companies to synergise their operations and respective strengths, to provide a powerful combination in the global bicycle industry.''
Under the deal, Mifa would issue approximately 4.9 million new shares to Hero via a rights issue dealcurry.com reported.
Mifa has been negotiating with its lenders for partly rolling over its debt and cutting its funding rate, Reuters reported. Mifa is a big supplier in the mass-market bicycle segment and routes its sales through European supermarket chains such as Metro and Aldi.
The acquisition would get Hero access to electronic drive unit (EDU) technology, which it uses in e-bikes.
Hero would through its unit OPM Global, subscribe to 4.9 million new shares issued by MIFA and also acquire shares from existing shareholders. A rights issue would be made in the next few months. After the new share issue that would expand Mifa's capital base, OPM Global - Hero Cycles would have a 47-per cent stake in MIFA.
According to commentators, the deal would provide it a manufacturing base with supply chain network and access to critical technology along with an entry into the lucrative European market, especially in e-bikes.
Apart from the mass market bicycle segment which it services through large retail chains such as Aldi and Metro the company had recently made a foray into the ebikes segment with its 'Grace' brands.
The company had however been burdened by heavy debt and was lagging in making payments to creditors. The OP Munjal group controlled Hero seeks to turn around the company.
