PE-backed Thomas Cook India, Sterling Holiday to merge

The combined entity will be India's largest holiday company, with an aggregate value of approximately INR30 billion.

According to a regulatory filing, Thomas Cook will invest INR1.87 billion in Sterling as a preferential allotment, taking a 23.24% stake. The allotment is priced at INR90.49 per share, which represents a 2.7% discount to Sterling's Friday closing price.

The company will then purchase a 23.63% stake in Sterling from existing shareholders for INR1.76 billion and make an open offer for another 26% for INR2.3 billion, in accordance with regulatory requirements. Finally, Thomas Cook will have the option to buy a further 7.2% for INR630 million.

Bay Capital Partners will make a partial exit from Sterling, reducing its holding from 10.67% of the voting share capital to 2.09-6.58%. AVCJ Research has records of Bay Capital investing INR347 million (then $7.88 million) for a 19.37% stake in 2010 and INR38 million (then $850,000) for a further 1.20% the following year.

EM Capital Partners' India Discovery Fund, meanwhile, is willing to cut its stake in Sterling to as little as 3.15%. Cutler Venture Partners and Beacon India Private Equity are also recorded as having invested in the company since 2009.

The merger will give Thomas Cook access to Sterling's network of 19 resorts in 16 holiday destinations across India. The company also has 15 additional sites where it plans to add new resorts in the coming years. Furthermore, Sterling has an affiliation with Resort Condominiums International that allows members to vacation in more than 4,000 resorts globally.

"The synergistic opportunities that this new partnership between Thomas Cook and Sterling Resorts offers are enormous, because they create multiple avenues to grow our respective businesses and to create valuable business opportunities together," said Madhavan Menon, managing director of Thomas Cook India.

Ramesh Ramanathan, Sterling's managing director, will continue to lead the business post-merger under an independent board. The transaction, which is subject to regulatory approval, is expected to close by the end of the 2014 financial year.

Fairbridge, a subsidiary of Canada's Fairfax Financial Holdings, acquired Thomas Cook for $150 million. Last year it bought a majority stake in human resources firm Ikya Human Capital Solutions for INR2.56 billion.

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• Topics
• Buyouts
• Exits
• Consumer
• South Asia
• Consumer
• India
• Fairbridge Capital
• M&A