[Aditya]

Erik Buell Racing (EBR), the technical partner of Hero MotoCorp, has ceased operations. With outstanding liabilities exceeding $ 20 million, the company is seeking court protection from creditors under a state statute that is similar to federal bankruptcy law. The development will see 126 employees rendered jobless.

While EBR's bikes did well on race tracks, the company struggled to sell them in the market dominated by Japanese and European marques. Additionally, the company has not been able to receive the necessary funding to secure its future.

EBR was founded in 2009. In 2013, Hero MotoCorp Acquired a 49.2% stake in the East Troy, Wisconsin (USA) based company for a sum of $ 25 million. According to the agreement, EBR would sell Hero's two-wheelers in USA through its dealership network.

With EBR shutting shop, Hero's plans to develop high-end performance motorcycle could be dealt a severe blow, since the Indian two-wheeler giant was sourcing technology from the American company.

Source: JS Online

[GTO]

Am surprised at this news, especially since Hero owns 49% of Buell Racing. $20 million is chump change for Hero - I'm curious to know why Hero didn't step in and save Buell? They perhaps didn't see any future gains from the partnership.

The coming days will throw more light on the matter. Will be interesting to see Hero's comments on the same.

[ashwin.terminat]

Strange news, this.

I really though EBR would herald in a new era for Hero MotoCorp, but looks like that isn't going to be the case.

The EBR relationship has resulted in a few new models, the updated Karizma twins, the HX250R and the Hastur. But I wonder if this is all Hero saw when they invested in EBR initially. The Karizma twins are doing horribly in sales.

They sold 7 pieces in December, 2014.
They sold 10 pieces last month.

The HX250R is still lurking in the wild and there are no traces of the Hastur reaching us anytime soon.

Either way, maybe Hero is looking to source technology more from its own R&D plant in Rajasthan and probably expecting a bit more from their joint venture with Magneti Marelli.

[rahul4321]

Since I am from the M&A domain, I may be able to shed a bit more light on this. Whenever a company files for bankruptcy; the creditors and shareholders (if the company is not closely held or is listed) ask the court to appoint a liquidator to oversee the bankruptcy proceedings. This liquidator sells of the assets of the company (tangible and intangible both) to the highest bidder and from the proceeds of the sale, pays back the creditors and the shareholders. If the amount of proceeds from the sale exceeds the total outstanding amount to be paid, the creditors (1st priority) and shareholders (2nd priority) are paid in full. However this scenario is practically extremely unlikely, and in most cases the company does not even have the money to pay the creditors off in full and in this case- the creditors are paid pro-rata to their outstanding dues.

Now why did Hero not step in to save Buell. If Hero does so- they would need to pay off all the creditors as well as buy out the remaining 51% stake from extremely spooked shareholders who would want to offload their holdings at the first available opportunity. Buell- apart from their technological know how (intangible asset) does not have anything that Hero wants. So there is no point in Hero spending so much money to buy a company which after paying off its creditors and shareholders would leave Hero only with its tangible assets (which Hero doesn't care about)

An easier option for them would be to let the 126 employees be laid off by EBR and hire them on Hero's payroll. These 126 employees make the bulk of the intangible assets with regards to technological know how. The other component of EBR's intangible assets would be their existing and future product pipeline, blueprints for high powered engines and other proprietary knowledge (which its bigger and immediate Japanese and Italian competitors would have no interest buying since they have bigger and better R&D teams). This proprietary knowledge could be purchased by Hero for a fraction of their cost when the liquidator makes the sale to pay the creditors.

[Aditya]

Hero MotoCorp has delayed the launch of the HX250R motorcycle in India. The company’s original plan was to introduce it’s the quarter-litre motorcycle in the second or third quarter of FY2015-16. Now, the bike is not expected to go on sale sometime in the next calendar year.



The reason for this delay is the closure of Hero's technical partner, Erik Buell Racing (EBR). The American company filed for bankruptcy in April. Hero had acquired a 49.2% stake in EBR for a sum of $ 25 million. The HX250R was being developed jointly by the two companies.



The HX250R was rumoured to be in the advanced stages of its development. Hero is now expected to use its own research and development resources to develop the bike further. The company's upcoming R&D centre at Kukas, near Jaipur is expected to be operational later this year.



Hero had showcased the HX250R motorcycle at the 2014 Auto Expo. It has a 249cc, single-cylinder, liquid cooled engine with EFI that was capable of delivering 31 BHP and 26 Nm of torque. The engine is mated to a 6-speed transmission. The bike has a geodesic tubular chassis with a telescopic fork front suspension and a monoshock rear suspension with 5 step adjustments. Stopping power comes from a 300 mm disc brake at the front and a 220 mm disc brake at the rear. The bike also features combi brakes with optional ABS. It has a 12.9-litre fuel tank.



Source: Autocar Professional

[rajeshsundaram]

Noob Question.

Why dont HERO acquire EBR? Is there any legal issues?

IMO As EBR is on the bankruptcy line, the valuation should be very 'economical' to Hero. Aquisition will let HERO take advantages of EBR's patents and technologies.

[Aditya]

Unconfirmed reports suggest that Hero MotoCorp has decided to buy out EBR and offered full time employment to Erik Buell. The move is likely to enable the company complete the development of the HX250R and Hastur motorcycles. It could also see Team Hero EBR World SBK team return. EBR will carry out operations in East Troy, Wisconsin (USA) as it did before bankruptcy.

Link to Team-BHP News Article

[Haroon]

Some months back I happened to see few new EBR bikes in flesh at one of the BMW dealerships in Boston and I must say the fit & finish was fantastic. To me it looked more in the Italian territory than Japanese. They were on sale at heavily discounted prices for obvious reasons.

Although Eric Buell has his focus more with racing roots, since they have a good engine platform and a fairly good R&D team, in addition to a premium supersport bike, if they can bring out a few variants with revised engine/chassis features in the naked roadster, touring and sport segment at affordable prices (position closer to the japs) & with reliable performance, I feel Hero should be able to turn around the fortunes of this company on the world market.

[PrasannaDhana]

Even if things pan out in favour of HX250R's debut in 2016, it will beba case of too little too late!

Speed junkies have the RC390/D390, tourers don't expect cruising speeds >120kmph and will be happy with the tested and tried CBR 250R.

Knowing how Hero prices its products, it is definitely not going to be vfm. I have been a karizma fanatic, owning the zma r and zmr. They were nice machines. But hero faces the fate of Maruti.. Pricy offerings from the same stable don't sell as much as the competition.

[Aditya]

Hero MotoCorp has announced that it will acquire the assets of its bankrupt US -based technical partner, Erik Buell Racing. As part of a settlement agreement with court-appointed receiver, Hero MotoCorp subsidiaries HMCL NA Inc and HMCL Americas Inc will take over certain tangible and intangible of EBR free and clear of all encumbrances, for a consideration of $ 2.8 million.

Link to Team-BHP News Article

[ku69rd]

Originally Posted by Aditya

, Hero MotoCorp subsidiaries HMCL NA Inc and HMCL Americas Inc will take over certain tangible and intangible of EBR free and clear of all encumbrances, for a consideration of $ 2.8 million.
]

Interesting move, would that mean Hero Group will try to focus on liter class to make good their investment?

Considering that their previous venture did not set the box office collections ringing with the Karizma bombing big time.

[MHG]

Has anyone read this earlier news report ? http://www.roadracingworld.com/news/...uble-in-india/

Insiders say that Hero has not paid EBR about $20 million owed for engineering and design work EBR did on 13 new Hero models for the Indian market. EBR bore the expense of the engineering and design work, then ran out of operating capital while waiting to be paid for that work, those insiders said.

Was this some sort of financial tactic to buy EBR at a much cheaper price than it was previously valued at ? Remember, Hero's original investment of $25 million was for a 49.2% stake. Now they got the rest of EBR for what seems to be peanuts.

[Aditya]

The manufacturing assets of the company have been sold to Atlantic Metal Group LLC for $ 2.25 million under an auction ordered by the Walworth County Circuit Court.

These assets include factory machinery, tooling, motorcycle inventory, parts inventory, accounts receivable and intangible assets.

EBR had assets worth $ 20.8 million and liabilities amounting to $ 20.4 million, when the company shut down, leaving 130 people unemployed. Bruce Belfer, the owner of Atlantic Metal Group, has been a biker for 30 years. He has disclosed that he is planning to restart the EBR's operations and re-hire the employees. The company will stay in East Troy, Wisconsin.

Link to Team-BHP News Article

[Visran]

That came as a surprise, all these days there was a strong rumor about Hero buying out the EBR completely.

What is going to happen to Hero's 49+ stake which they had acquired before EBR went bankrupt

[Aditya]

With the Erik Buell Racing shutting down due to bankruptcy, Hero MotoCorp has started to bring back the product development of its models to India.

Link to Team-BHP News Article