Hero Cycles buys Germany's Mifa: Five deal highlights

Moneycontrol Bureau

India’s Hero Cycles, owned by the OP Munjal Group, has struck a deal with Germany’s Mitteldeutsche Fahrradwerke (Mifa) to buy stake a 60 percent stake in the firm for a reported amount of 19 million euros (Rs 152 crore).The move will help Hero, the world’s largest bicycle-maker by volume, get access to Mifa’s high-end technology, especially in the e-bikes space, as well as critical markets such as Europe where it has robust 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.” Here are five highlights from the deal:-    As per terms of the deal, Mifa will issue approximately 4.9 million new shares to Hero via a rights issue. Separately, Mifa is also negotiating with its lenders to roll over part of its debt and slash its funding rate, a Reuters report recently said.-    The opportunity: Mifa is a big supplier in the mass-market bicycle segment whose products sell in European supermarket chains such as Metro and Aldi. The acquisition gives Hero access to Mifa’s electronic drive unit (EDU) technology, which it uses in e-bikes.-    The financials: The unlisted Hero currently sells its products in about 90 markets and has revenues of Rs 2,000 crore. At a production of 60 lakh units a year, it has a 5 percent share of volumes in the USD 49-billion (Rs 2.94 lakh crore) bicycle market.The debt-stricken Mifa, last year posted a net loss of 19 million euros (Rs 152 crore) on revenues of 100 million euros (Rs 800 crore). Last year, its production stood at 5 lakh units.-    The re-structuring: Hero would look to shift of Mifa’s operations to India as well as using Hero’s cost leadership to drive higher value to crack the global mass-market cycles market. "We are looking at a turnaround of this new company in the next 18 months. We would be putting up the plan devised by a global consultancy firm for changing the fortunes of Mifa. The supervisory board would also be reorganised in due course to bring some desired changes with some Indian participation," Pankaj Munjal told the Economic Times. -    The product strategy: Hero would also look to bring some of Mifa’s products, especially in the high-end bike segment, to the India market.