The company will be spending an additional 4 million Euros as capital expenses in restructuring the acquired company.
"The deal is worth 19 million Euros. 15 million euros for 60 per cent stake and additional 4 million Euros for capital expenses in restructuring the acquired company," sources in the company said.
The company, however, has the option to further increase the stake in MIFA in future.
Hero in a statement said, "this is a first of its kind partnership in the bicycle space globally, with an Indian company providing its cost efficient manufacturing base and supply chain to a European company with critical technology and access to the lucrative European market, especially in e-bikes."
MIFA, with revenues of around 100 million Euros, is a specialist in the mass market bicycle segment in Europe. The company has recently made headways in the e-bike segment in Europe, with its 'Grace' brand of e-bikes.
This acquisition also gives Hero Cycles access to the critical Electronic Drive Unit (EDU) technology, used in e-bikes.
"Not only would Hero Cycles provide a manufacturing base to MIFA, but also introduce high quality bikes in the Indian market using MIFA's German engineering expertise," Hero Cycles Co-Chairman and Managing Director Pankaj Munjal said.
He said this transaction is only a first step in Hero Cycle's ambition to become a leading global cycle manufacturer, not only by volume but also by value.
"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," he said.
Talking about the transaction structure, Munjal said definitive agreements has been signed with MIFA and the company is hopeful of closing the transaction in about six months. However, the operational integration between the two companies will commence immediately.