The LML-Piaggio Break-Up|Business Strategy|Case Study|Case Studies

The LML-Piaggio Break-Up

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Case Details:

Case Code : BSTR006
Case Length : 7 Pages
Period : 1998-1999
Organization : LML, Piaggio
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Breakup

Analysts felt that Singhania's initial move of filing a petition for buying Piaggio's stake in LML was a bolt from the blue.

The company had gained market share and its profits were also improving steadily. Also, in 1997, two months before the death of Giovanni, the partners had announced their decision to enter the motorcycle segment. Moreover, the fact that LML's stylish scooters were more stylish when compared to Bajaj's stodgy models, was attributed to LML's partnership with Piaggio. Above all, as Piaggio was also LML's technology partner, the fight could put on hold Singhania's plans of launching the Gilera range of motorcycles through LML. However, Singhania felt that Piaggio's contribution had become insignificant. He said, "Piaggio has become redundant to the joint venture...

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The Settlement

On November 15, 1999, LML and the Piaggio group resolved their long-pending disputes and differences in an out-of-court settlement agreement.

As per the agreement, LML had to purchase the entire 23.6% stake in the company at the rate of Rs.14.06 per share. Some of the other terms of the agreement are shown in the box.

The JVA of LML with Piaggio will be terminated. The exclusivity rights of LML will also terminate.

LML shall retain non-exclusive rights to use all Piaggio technology received for all vehicles other than Piaggio motorcycle.

Piaggio would become free to set up any business in India, including competing business except manufacture of motorized two-wheelers powered with lateral engine till December 31, 2007...

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