WHOSE KEYS? – But Berggruen says only Nicolas Berggruen holds 100% stake; co may lose 'Prima' Mahabaleshwar resort and Shirdi hotel
Lemon Tree Hotels which is conducting due diligence for acquiring Berggruen Hotels may have to settle with three former employees of the latter who claim to hold stake in the company that owns the 'Keys' brand.
However, Kabir Kewalramani, managing director, Berggruen Holdings India (the investment arm of Nicolas Berggruen), said Nicolas Berggruen holds the entire 100% stake in the hotel business. He said no other former or current executive had any shareholding in the hotel company.
A source familiar with the development told DNA Money, "Three former executives -- Arif Khan, Alex Joshi and Partha Chatterjee -- who were part of the management team when the company was founded were allotted stakes, which they continue to hold even today. The shareholding is clearly documented in the ROCE filings by the company," said the source, adding that the stake held by Sanjay Sethi, former MD and CEO was bought by Berggruen Hotels in 2017.
While Khan was the chief human resource officer, Joshi was the chief operating officer of the company at the time of its launch in 2007. Chatterjee, a former Taj Group executive, was Berggruen Hotels's chief marketing officer at that time.
Former chief finance officer Vikas Chadha is the fourth executive with "carried interest" in Berggruen Hotels. A carried interest is similar to ESOPs (employee stock options) and gives one a certain percentage in the company's valuation. Chadha, who quit Berggruen Hotels a few weeks ago, is set to take up a group CFO position in a new company with multiple lines of businesses, including hospitality.
"Both Khan and Joshi own under 1% stake in the company while Chatterjee owns as much as 2%. The stakes are being held in demat and or tax-saving form as there was no visibility on payouts for a long time. Now that Lemon Tree Hotels is buying out the entire company, it will have to take into account the stakes being held by former company executives while arriving at the final deal value," said the source, adding that depending on the exit terms, Lemon Tree Hotels may have to reach out to the four former company executives individually to buy them out.
While Chadha could not be reached for a comment, Joshi confirmed that the three former executives, including him, hold stakes in Berggruen Hotels. He said they will now reach out to the management of Lemon Tree Hotels as well as Berggruen Hotels to seek clarity on this matter.
The second crucial development is the termination of two management contracts of premium segment properties being operated/ managed by Berggruen Hotels under the 'Keys Prima' brand.
The first one is Berggruen's flagship resort in Mahabaleshwar that's owned by Mumbai-based realtor Evershine Builders. The other hotel undergoing termination of the management contract is owned by Shraddha Resorts in Shirdi.
Earlier, Kewalramani had denied the management contract termination.
However, sources familiar with this development said the two management contracts are being processed for termination. "The first termination was initiated by the asset owners of the Mahableshwar resort a couple of weeks before the non-binding term sheet was signed with Lemon Tree Hotels. Asset owners of the Shirdi hotel have initiated the termination last week," said one of the sources.
"With the two Keys Prima branded hotels set to exit the portfolio, Berggruen will be left with just one premium segment property -- Keys Prima Hotel Parc Estique, Pune," said another source, adding that the total count will now come down to 19 hotels with 1,739 rooms in 17 cities from the earlier numbers figures- 21 hotels with 1,911 rooms in 19 cities.
UNDER CLOUD
- Former executives were allotted stakes when the company was founded, which they continue to hold even today, sources said
- Two management contracts of premium segment properties being managed by Berggruen under the 'Keys Prima' brand have been terminated
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