India Awards: PE Deal of the Year – Hero Honda Motors

"It was a unique set of circumstances," says Pawan Singh, a partner with Bain Capital India. "Deals of this size outside of infrastructure are the exception to the rule. At same time assets of such quality typically don't come into the PE space. Companies with this kind of market position, scale and operational history are usually able to tap the public market."

The nature of the transaction helped. Hero Honda was created in 1984 as a joint venture between India's Hero Group, controlled by the Munjal family, and Honda Motor of Japan. It claims to be the world leader in terms of annual sales volume of two-wheel vehicles by a single company.

Hero Group wanted to buyout its partner but was supposedly wary of executing the transaction through leverage and the capital markets for fear of a sell down. Private equity involvement was a logical alternative, plus it offered the prospect of replacing Honda with a new partner to guide the company in its next growth phase.

Bain came in and the Munjal family gained financial backing for its portion of the transaction from Government of Singapore Investment Corp. (GIC). They paid $851 million for Honda's 26% interest in the joint venture in what was by far India's largest buyout of the year. Bain invested via BC India Private Investors II - and owns the majority of the equity - while GIC used Lathe Investment Private. The deal was priced at a near 50% reduction on the most recent trading price.

For Bain, though, the seeds of the deal were really sown back in 2008 when the Manjal family was looking to do a different transaction - which never came to fruition - and reached out to private equity. These relationships were relied upon once again in the summer of 2010 as buyout negotiations commenced with Honda.

KKR, TPG Capital, The Blackstone Group, The Carlyle Group, Clayton Dubilier Rice and Temasek Holdings were all reported as considering bids.

Although some of the competition had longer-standing ties to Hero Group management, Singh says that Bain attempted to build a broad-based, partnership-oriented relationship with the company. This saw many of the private equity firm's global partners meet with the Munjal family, including through many trips to India.

"We spent a lot of time emphasizing how Bain could add value," Singh says. "The company now has a degree of freedom in terms of strategy that it didn't have as part of the joint venture. We showed how Bain works with our portfolio companies and the resources we make available to these companies. And I'm sure we were competitive on price as well."

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• Topics
• South Asia
• Performance
• Buyouts
• Bain Capital Asia
• India
• AVCJ Awards
• buyout