Thomas Cook (India) Ltd (TCIL) and Sterling Holiday Resorts (India) Ltd announced a merger between the companies today.
Ramesh Ramanathan, Managing Director, Sterling Holidays, said the merger would benefit from both natural and multiple synergies between the two organisations. Importantly, it would provide Thomas Cook a ready inventory of holiday rooms for their clients, while providing Sterling the opportunity of expanding and renovating its properties. The deal will enable Sterling to go to new destinations, buy larger properties and achieve its goals faster, Ramanathan said. Both companies will be able to de-risk the seasonal nature of their holiday businesses, their officials said.
The deal values Sterling Holidays at about Rs 870 crore. As part of a multi-stage process, TCIL will make a preferential allotment investment for approximately Rs 187 crore in Sterling. It will purchase shares from Sterling shareholders for Rs 176 crore. It will then make a mandatory open offer for Rs 230 crore. The merger between the two companies will be at a defined swap ratio of 120:100. That is shareholders of Sterling will get 120 shares of TCIL for every 100 shares in Sterling. ICICI Securities was the merchant banker for the deal, while Antique Group was the advisor for the transaction.
The deal has been cooking over the past six weeks and was signed late on Friday night, Madhavan Menon, Managing Director of TCIL, said.
Sterling Holidays has a network of 19 resorts in 16 holiday destinations that together have about 1,512 rooms. The company has about 70,000 members. About half its revenues come from membership of its vacation ownership plans, while the other half comes from non-members. Ramesh Ramanathan said the company has about 15 parcels of land of about 150 acres where the company can build another 2,500 units. The company has turned in operating profits in the last quarter and its current debt of about Rs 44 crore (mainly a term loan from ILFS) would be settled soon through the infusion that comes from TCIL.
Menon explained that post the deal, Ramesh and his team would remain with Sterling and run it as a subsidiary of TCIL — but with an independent board.
The TCIL share closed at Rs 87.50, while the Sterling Holidays share ended at 92.90 on Friday evening.