In a significant move underscoring its commitment to its long-term partnership with KTM and recognising the opportunity in the exciting world of premium/sports motorcycles given the brand’s preeminent position, Bajaj Auto Limited, through its wholly owned subsidiary Bajaj Auto International Holdings BV (BAIHBV), intends to take control of the KTM business that is headquartered in Austria, subject to necessary regulatory approvals.
With this action and post-requisite approvals coming through, Bajaj will shift gears from hitherto being a dormant minority investor to a majority owner in the global KTM company, whilst it continues to accelerate the thriving KTM business that is run out of India under the joint development program, where it develops, makes and sells in India as well as exports to 80 countries across the KTM network.
Simultaneously, BAIHBV has arranged a debt funding package of €800 million to enable the continuity of the KTM business by paying off the approved quota to the creditors in furtherance of KTM’s debt restructuring with the approval of the competent Court in Austria and infusing funds into the company to revive its operations and working capital cycle. Of this total €800 million debt package, €200 million has already been infused into the company so far and the balance €600 million is being done now.
This twin move of taking ownership (subject to approvals) and paring down debt by providing liquidity at a crucial stage, positions Bajaj Auto as a driving force in shaping the future of one of world’s most admired high performance motorcycle companies.
The Current Transaction
To address the KTM business’ acute liquidity challenges and enable a structured revival of the brand that has a strong heritage and acclaimed position worldwide, Bajaj Auto outlines a set of strategic interventions.
The proposed equity acquisition by Bajaj of a controlling stake in PBAG and therefore, in PMAG/KTM (upon receipt of regulatory approvals) after exploring various other alternatives until recently, is a critical step in realigning governance to restore confidence among stakeholders, setting a path for operational restructuring of the business and creating flexibility for potential partnerships.
The debt package totalling €800 million seeks to address liquidity needs to meet creditor obligations pursuant to the approved restructuring plan and fund restart of operations.
Next Steps
The immediate next step is to secure binding restructuring orders from the Court in Austria to mark the end of the self-administration process and settle the creditors’ quota. Alongside, applications are being made to the Austrian Takeover Commission, Foreign Investment Control and Merger Control Authorities, as applicable for their approval.
Till such time these are received, the current control setup shall standstill and prevail. Finally, after months of stoppage, the production of bikes and the supply of parts, garments and accessories to the markets will be started.
In effect therefore, the larger role of Bajaj in the future of the KTM business offers potential to unlock a triad of opportunity covering global growth, brand elevation, and technology leadership.
