Mumbai: Travel company Cox and Kings Ltd, through its UK unit Prometheon Holdings (UK) Ltd, will acquire 100% of Holidaybreak Plc for £312 million (around Rs2,250 crore) in an all-cash transaction.
Cox and Kings has secured permission from controlling shareholders holding up to 31.8%, and remaining approvals are expected shortly, while the acquisition is likely to be completed before 27 September, it said on Wednesday.
This is the biggest overseas acquisition by an Indian travel company and the ninth acquisition by Cox and Kings.
Cox and Kings has secured permissions to match the bid of a potential competitor, executive director Peter Kerkar said.
This acquisition will help in effectively countering the cyclical nature of travel business in India as the overseas travel business largely happens in March to June, while in India it is July to September, Kerkar added.
Holidaybreak is a UK-listed specialist travel company operating in education and activity travel groups. It has operations in the UK, Germany, Switzerland, Austria, Belgium, the Netherlands and Ireland.
“It is a huge step forward for an Indian listed company acquiring a UK-listed travel operator,” said Ashwini Kakkar, executive vice-chairman at travel firm Mercury Travels, and an industry veteran who was formerly chief executive officer and managing director at Thomas Cook (India) Ltd.
“Though Cox and Kings had made few interesting acquisitions including Tempo in Australia, it did not add much value. But this acquisition will be a gamechanger for Cox and Kings. This will bring in geographical diversification for the company and can spread the risk,” Kakkar said.
Nomura and Axis Bank Ltd advised Cox and Kings, and Citigroup Global Markets Ltd and Peel Hunt Llp were advisers to Holidaybreak.
Shares of Cox and Kings fell 2.38% on the Bombay Stock Exchange to close at Rs192.95 while the benchmark Sensex slipped 0.46% to 18,432.25.
The acquisition would be funded through a mix of equity and debt, chief financial officer Anil Khandelwal said. He said his company has secured a line of credit from Axis Bank and has got a cash balance of Rs1,100 crore.
Holidaybreak has reported a profit before tax of £30.7 million on a revenue of £461.17 million in 2010, according to its website.
Khandelwal said Holidaybreak has got a debt of £137 million, which is largely working capital or cash credits.
“We believe that the potential to drive synergies between the strong India business and potential UK business is large and is likely to be the key stock driver over the next 18 months. Interestingly, nearly 80% of Holidaybreak’s operating profit for fiscal year 2010 was driven by specialty travel verticals of education, adventure and camping,” said a research report from the brokerage unit of Morgan Stanley.
A media statement said Cox and Kings, in particular its outbound UK and European travel businesses, will benefit from greater access to certain markets and customers as a result of the proposed acquisition.
Kerkar said his firm will retain the Holidaybreak brand as the target company has a great brand recall and is market leader in education and adventure tourism.
Martin Davies, group chief executive officer of Holidaybreak said the board was confident that significant value could have been generated for shareholders over time through implementation of his company’s stand-alone strategy.
Under the terms of the acquisition, Holidaybreak shareholders will receive 432.1 pence in cash per share, according to the statement. This was a premium of approximately 35.5% to the closing prices of 319 pence on 22 July.
Also, this was at premium of approximately 54.2% to the average closing price of approximately 280.3 pence a Holidaybreak share for the three-month period on the London Stock Exchange.