Bajaj Looking To Swap Stake In KTM AG With Shares in Parent Company

Bajaj and KTM have had a mutually fruitful partnership which goes back to more than a decade now. And what started in 2007 has evolved into one of the biggest partnerships between an Indian and a foreign two-wheeler maker since Hero Honda.

Now, Bajaj looks on track to take its partnership with KTM to the next level as it’s looking to swap its over 48 per cent stake in KTM AG (the manufacturing company of KTM bikes) for a comparable stake in KTM Industries AG (the holding company which owns KTM, Husqvarna and WP).

While the move will have no immediate implications on the KTM and Bajaj brands in India, it will lay the foundations for the Indian manufacturer to have a much bigger say with a stake in the parent company. Bajaj and KTM have been co-developing smaller displacement motorcycles in India, and if the deal goes through we can expect Bajaj to have more involvement in product development and strategic decisions in KTM.

Both Bajaj and KTM have benefitted immensely from their partnership. The homegrown manufacturer has efficiently implemented KTM’s technology to offer a wide range of products under its brand, which includes the Bajaj Dominar 400, Bajaj Pulsar NS 200 and the RS 200. With the technical know how from KTM, Bajaj has been able to further amplify its manufacturing techniques with the help of norms set by the Austrian company while delivering competitive pricing.

On the other hand, the Austrian motorcycle manufacturer has gotten economies of scale by manufacturing in India. Bajaj’s Chakan-based plant makes 125cc, 200cc and 390cc Dukes for KTM, which are sold not only in the domestic market but also exported to Europe, US and Japan. Thanks to Bajaj’s know how of producing mass market motorcycles, KTM has also become a high volume player in Europe and has been the largest bike maker in the continent since 2012.

While the deal is yet to finalise, both Bajaj and Pierer Industries (which controls a majority stake in KTM Industries) have already started looking at feasible proposals for the transaction, which could see completion by second quarter of 2019. Here’s what manufacturer said in its official statement.

PRESS NOTE:

KTM Industries AG: Pierer Industries and Bajaj in discussions for Bajaj to participate at KTM Industries level

Pierer Industrie AG holds approximately 62% of the shares of KTM Industries AG (the "Company"). The listed company KTM Industries AG holds approximately 51.7% of the shares of KTM AG; Bajaj Auto International Holdings BV (referred to as Bajaj) holds approximately 48% of the shares of KTM AG.

KTM Industries AG was informed by Pierer Industrie AG and Bajaj that they have started discussions on assessing the possibility of transferring Bajai's 48% stake in KTM AG to KTM Industries AG, with the Pierer-Group continuing to retain the controlling majority over KTM Industries AG. Pierer Industrie AG and Bajaj will now evaluate the proposals in detail. The transaction decision is targeted to be made in the second quarter of 2019.

If Pierer Industrie AG and Bajaj decide to execute the transaction, KTM Industries AG will examine the legal and economic requirements and conditions of a capital increase by contribution in kind from the existing authorized capital of the Company. The authorized capital enables a capital increase of up to 50% of the existing share capital. If the transaction is executed, the Company's stake in KTM AG would increase from current 51.7% to approximately 99.7%.

About KTM Industries-Group

The KTM Industries Group is the biggest European motorcycle producer and focuses on sport motorcycles and electro mobility. With its worldwide renowned· brands KTM, Husqvarna Motorcycles and WP, the group is in its segments among the technological and market leaders. Within the group there is a high degree of technological network, which is, in this form, unique in Europe. Strategic partnerships at an operational level strengthen the competitiveness in our respective markets. All these factors are the basis for the high innovation level of the KTM Industries-Group and ensure a sustainable organic growth.