Bajaj Auto Eyes Full KTM Takeover With Call Option Deal, Stefan Pierer To Exit
The “call option” is aimed at buying out stakes held by Pierer Group companies in the complex holding structure for KTM. That would end Stefan Pierer’s three-decade long association with KTM.
Bajaj Auto International Holdings BV has put in motion a deal to buy out Pierer Group and take full control of KTM.
The Netherlands-based wholly-owned subsidiary of Bajaj Auto Ltd. has entered into a "call option" agreement with Pierer Konzerngesellschaft mbH (PIKO) and Pierer Industrie AG to buy their stakes in a complex holding structure for KTM, according to an exchange filing on Friday. That would end Stefan Pierer’s three-decade long association with the Austrian bikemaker that is facing bankruptcy proceedings.
A call option agreement is a financial agreement that gives the buyer the right, but not the obligation, to buy an asset at a predetermined price before a certain date. Essentially, it's a bet on the asset's price going up.
On Thursday, Bajaj Auto outlined its intent to take control of the rebuilding of the KTM business by way of a rescue package worth €800 million.
As part of the revival plan, Bajaj Auto BV will acquire from Pierer Industrie AG a controlling stake in their joint venture Pierer Bajaj AG, the holding company of Pierer Mobility AG—the listed parent company of KTM AG. PIKO, controlled by Stefan Pierer, is the holding entity of Pierer Industrie AG. The flowchart below demonstrates the holding structure.
“The execution of this call option agreement is therefore a critical step in Bajaj Auto BV assuming control of KTM and should be seen as a key step in realigning the governance to restore confidence among shareholders,” Bajaj Auto stated in the exchange filing.
“The full exercise of the options will mark the exit of the Pierer Group from KTM”, and set the stage for operational restructuring and create flexibility for potential partnerships.
On Friday, Bajaj Auto shares rose 0.05% to Rs 8,738 apiece on the BSE even as the benchmark Sensex ended the day 0.95% higher at 81,721.08 points.
