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Ending months of speculation, online hospitality firm OYO on Friday said it has called off its proposed acquisition of budget accommodation aggregator ZO Rooms. The deal came to light in 2016, but discussions between them had been on since 2015.
In a statement on Friday, OYO said that in late-2015, it had explored a potential acquisition of ZO Rooms, and the non-binding term sheet for that deal was terminated in September 2016.
“Following this, we tried to identify potential value in their business, but could not reach an outcome. We can now confirm that OYO has ended all discussions on the matter,” the company said in a statement.
However, it appears that the two did not part on good terms. Soon after OYO released its statement, ZO Rooms said OYO was resiling from the contractual terms after acquiring the entire ZO Rooms business by March 2016.
Online media outlet VC Circle quoted ZO Rooms as saying that OYO was not acting in good faith and that ZO will take all steps to protect its interests and enforce its rights. ZO did not elaborate its next course of action. This is the first time both parties have commented on the deal. In 2016, SoftBank had mentioned the deal in one of its presentation to its investors.
OYO had recently raised $250 million (₹1,600 crore) in a fresh financing round led by SoftBank. Existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital had also participated in the Series D funding, which also saw the entry of Hero Enterprise. OYO’s founder and CEO Ritesh Agarwal said OYO intends to add 10,000 rooms to its network each month.
No fresh funds for ZOZO Rooms, on the other hand, failed to raise any fresh round of funds after receiving $35 million, across rounds, from the likes of New York-based investor Tiger Global Management.
ZO Rooms, founded in August 2013 by Dharamveer Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu, started as a budget hotel brand, but grew in a year to become a chain of premium budget hotels with 750+ properties. But the funding crunch brought down the company.
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