Archive : $169.5 Million Deal For Honda and Rover

Special to The New York Times

The Honda Motor Company has agreed to buy 20 percent of the Rover Group, the British car maker, in a cash-and-stock deal possibly worth $169.5 million, the two companies announced today.

Honda will pay £30 million, or $48.9 million, and swap 20 percent of the equity in its new British manufacturing arm in return for a 20 percent stake in the British car maker. Since Honda plans to expand its British manufacturing operations, it is difficult to put a precise value on the deal. However, the two companies estimate Rover’s 20 percent stake in Honda’s British subsidiary will be worth worth £74 million, or $120.6 million, by 1993.

The new equity arrangements, which had been expected for several months, essentially commit Honda to building its European business in concert with Rover.

”Finally, Honda is coming off the fence,” said John Lawson, an auto industry analyst with the Nomura Research Institute in London. ”Up to the point of signing this deal, Honda could have chosen to go fully independent in Europe if it wanted to. Now, with the cross-shareholdings, it will be pretty difficult for Honda to forge its own path in Europe.”

The deal also gives Honda a larger stake in Britain, where its rivals the Toyota Motor Corporation and Nissan Motor Company have led Honda in constructing plants to serve the booming European market.

Rover has been manufacturing Honda automobiles in Britain since 1979, and Honda now provides the British company with significant new product design and engineering through joint-development agreements. Rover has produced three cars based mainly on Honda designs in recent years, and a fourth model is under development.

Honda, which already makes engines at a plant in Swindon, west of London, plans to expand the plant for full-scale auto assembly by the fall of 1992. Two versions of the same car will be produced for sale in Europe under separate nameplates by Honda and Rover.

The number of cars that Japanese companies can import from non-European plants is limited by quotas.

Keith Adams

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.