The Hindu Business Line : ITC board clears hotel arms merger, share swap ratios

THE board of directors of ITC Ltd, at its meeting held here today, has approved the amalgamation of its subsidiaries ITC Hotels Ltd and Ansal Hotels Ltd with itself. The board has approved the following share swap ratios: Three shares of ITC for every 25 shares of ITC Hotels and one share of ITC for every 150 shares of Ansal Hotels.

It is pointed out that in determining the share exchange ratios, the board was guided by a valuation exercise carried out by Mr S.B. Billimoria and Company (SBB), assisted by its former Managing Partner, Mr Y.H. Malegam. ITC Ltd holds approximately 72 per cent of the equity share capital of ITC Hotels Ltd, and together with ITC Hotels holds over 90 per cent of the share capital of Ansal Hotels Ltd. According to an official statement released by the company following the board meting, these holdings will stand extinguished upon amalgamation. It has also been clarified that those holding less than 25 shares would stand to benefit in a proportionate manner, strictly as per laid down legal guidelines, as applicable to odd lot shares.

Commenting on the board decision, the ITC Chairman, Mr Y.C. Deveshwar, said, "It's a win-win situation for all stakeholders. The timing of the amalgamation is particularly appropriate as the travel and tourism industry in India is poised for rapid growth."

The synergies of the proposed amalgamation will is expected to bring strategic benefits to all entities. While it will be EPS-enhancing for ITC, shareholders of ITC Hotels and Ansal Hotels will be able to participate in a larger growth opportunity, given ITC Ltd's diversified portfolio and strong balance sheet, says the official note.

The merger scheme is subject to approvals by the High Courts of Calcutta and New Delhi pursuant to the provisions of Sections 391 to 394 of the Companies Act, 1956, and to such other statutory and other approvals as may be necessary.

It is pointed out that nearly 80 per cent of the capital employed in the hotels business was already residing in ITC's balance sheet, and the amalgamation would facilitate better alignment of investment and incomes, besides promoting fiscal efficiencies, rationalising operating costs and facilitating clear visibility for investors of the totality of the company's hotels business. The ITC Hotels stock, at the NSE, today closed at Rs 146.15, up by Rs 3.25 from the previous day's closing price, a percentage increase of 2.27 per cent. The stock had touched a 52-week high of Rs 174 on June 28, 2004. The total traded quantity on Wednesday was 33,593 shares.

ITC Hotels derives substantial income from properties in tourist locations and from fees related to consulting, operating and marketing services According to market analysts tracking the development, the amalgamation if ITCHL with ITC could result in substantial savings for the latter by way of service tax outgo on the fee-based service contracts of ITCHL.

It is pointed out that the ITC-Welcomgroup division, post-amalgamation, may be well placed to attain a leadership position in the Indian hospitality sector, given its growing presence in the premium, heritage and mid market segments, its world class properties and excellence in cuisine.

More Stories on : Mergers & Acquisitions | Diversified

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page