Erik Buell has sold a 49.2-percent stake in his East Troy company, Erik Buell Racing LLC, to Hero MotoCorp Ltd. of New Delhi, India.
The two companies had formed a “strategic alliance” last year.
Erik Buell Racing specializes in designing and manufacturing powerful and high-speed custom motorcycles.
The Hero investment will allow the company to begin production on a less expensive motorcycle model. While the current line costs upwards of $39,000, the new line would be less than $20,000, Buell said.
EBR will be adding more employees this year and next year to increase production at its 63,000-square-foot East Troy plant. Buell expects to begin production on the new line by the end of 2013.
“We’ve already been ramping up,” he said. “We’re about 75 employees here now. We’ll be over 100 by late this year.”
With the transaction, Hero MotoCorp announced it is investing $25 million for its stake of EBR. The first tranche of $15 million has already been invested by HMCL. The second tranche of $10 million is proposed to be invested within the next nine months.
EBR and Hero had been discussing the deal for a long time and the businesses complement each other well, Buell said.
“Basically, we’d been looking for equity for some time,” he said. “We wanted to bring back full scale vehicle manufacturing. It absolutely had to be a minority stake … where I would stay in control.”
The investment in EBR is being done through Hero MotoCorp’s newly-incorporated wholly-owned American subsidiary, HMCL (NA).
Pawan Munjal, managing director and chief executive officer of Hero MotoCorp Ltd., said, “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. Indeed, this equity partnership is a natural extension of our existing relationship with EBR, which is going to further strengthen our strategic alliance. 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 evolving relationship with EBR is an initiative in that direction. We will continue to look for both organic and inorganic growth as we keep expanding globally. Our fully-owned new overseas subsidiaries such as the one in the U.S. and in Netherlands will play important roles in our future overseas acquisitions and investments.”
With the equity partnership, Hero MotoCorp will have representations on the EBR board with two directors and one observer. However, there will be no organizational changes at EBR, and Erik Buell will continue to be its chairman and chief executive officer.