Business
Post due diligence, Wyndham Hotel Group was likely to offer a lower valuation of around Rs 280 crore, say sources
Updated : Mar 21, 2018, 04:38 AM IST
The big deal that has been brewing in the Indian hospitality market since November 2015 seems to have fallen by the wayside. Talks between NYSE-listed global hospitality major Wyndham Hotel Group (WHG) and Anil Madhok-promoted Sarovar Hotels & Resorts for a possible acquisition of the latter’s India hotels portfolio have been called-off, according to industry sources familiar with the development.
The deal was terminated earlier this week, said sources.
Executives from both Wyndham Hotel Group and Sarovar Hotels & Resorts remained tight-lipped when dna approached them for their response.
In an email response, Deepika Arora, regional vice president - Eurasia, Wyndham Hotel Group, said, “We do not comment on specific transactions.”
WHG is one of the world’s leading hospitality companies with 7,670 hotels and 667,000 rooms, which operates 25 hotels in India across three brands – such as Ramada, Howard Johnson and Days Hotel brands. It also has franchising and management rights for Planet Hollywood hotel brand as well as Dream and Night hotel brands owned by Indian-American hotelier Sant Singh Chatwal of Chatwal Hotels & Resorts. Having a significant presence in India, the vacation ownership or time-share business under the banner RCI is also owned by Wyndham Worldwide.
On his part, Ajay Bakaya, executive director, Sarovar Hotels & Resorts, said, “I do not have any update or comments to make.”
Sarovar currently operates (under management and franchise agreements) over 70 properties in India and overseas in 3-, 4- and 5-star categories under brands such as Sarovar Premiere, Sarovar Portico, Hometel. The Sarovar portfolio also comprises eight Park Plaza hotels, three Park Inn hotels, and one Radisson hotel under franchise agreement with Carlson Hotels. This apart, there are over a dozen hotels in various stages of development.
On what could have possibly led to this transaction not going through, sources told dna that there was a major correction in the overall valuation that Wyndham was likely to offer post due diligence. “While the earlier figure was around Rs 330 crore, the new valuation arrived – after discounting the Carlson portfolio from the Sarovar bouquet – came to around Rs 280 crore. That’s a significant reduction of Rs 50 crore, which was not acceptable to the Sarovar Hotels ownership. This valuation disagreement has led to the deal being called-off,” said a source requesting anonymity.
In fact, dna had earlier reported that the Carlson portfolio of hotels in the Sarovar Hotels network was a major hurdle for a successful completion of this deal. And the post due diligence, results (of Rs 280 crore enterprise value) make it very evident that the Sarovar ownership would never get the valuation of Rs 330 or above being negotiated during the initial stages of negotiations for this transaction.
The possibility of this deal being called off also closes the exit doors for Sarovar’s financial investors Bessemer Venture Partners Trust and New Vernon Private Equity. The duo had invested Rs 37.5 crore in Sarovar back in 2005 and have been looking to exit the investment that has exceeded the holding period already.