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Blank check firm India Hospitality Corp. (IHC) has announced the acquisition of Mumbai-based Mars Restaurants and its sister concern SkyGourmet Catering for approximately $110 million. The sellers are Malaysia-based private equity fund Navis Capital Partners, which owns a majority stake in these companies, and Sanjay Narang the founder and promoter.

Under the terms of the acquisition agreement, the sellers of Mars and SkyGourmet will receive $91.6 million in cash and the rest in IHC ordinary shares on completion of the transaction. Additional consideration may be paid if the businesses achieve certain performance targets, a release said.

IHC, sponsored by New York-based Hayground Cove Asset Management, is a blank-check company created to acquire Indian businesses or assets in the hospitality, leisure, tourism, travel and related industries. In August 2006, the firm raised about $103 million by listing in London Stock Exchange's Alternative Investment Market.

Post the current transaction, the IHC shareholders will own about 88.9 per cent of IHC, while insiders, including Hayground Cove Asset Management and Navis Capital Partners, will hold 11.1 per cent. Affiliates of Navis Capital Partners and founder Sanjay Narang will continue to play an active role in the management of the combined businesses going forward, the release said.

Navis is also retaining an option to reinvest a substantial portion of the sale proceeds into IHC. Navis and its affiliates will be granted an option to subscribe for up to $75 million in cash for new IHC ordinary shares, which, if exercised in full, would result in its ownership interest in IHC increasing to about 20.7 per cent on a fully diluted basis.

The Nirula's Angle

The transaction also includes a provision for IHC to buy Nirula's, another Indian restaurant chain owned Navis. Nirula's is a Delhi-based fast food chain with a couple of hotels also under its belt. Navis and IHC will look at merging these properties with Mars' four star hotel brand Gordon House.

Mars operates two Gordon House Hotels, a four-star hotel chain catering to both the Indian business and high-end leisure traveler markets, besides a diversified portfolio of restaurants such as Not Just Jazz By The Bay, Tendulkar’s, All Stir Fry and Just Around The Corner. Mars has revenues of $7.2 million.

SkyGourmet, the airline catering company, currently operates from four locations with plans to expand to up to 12 by 2009. It plans to increase its capacity from 25,000 meals served a day to about 72,000 meals per day by 2009. The ocmpany has $11.7 million in revenues.

The combined revenues of Mars and SkyGourmet are $19 million, which values them about 5.8 times sales. Post transaction, the enlarged IHC will have about $10.2 million in cash on hand, and debt of $24.2 million. Banyan Tree Capital is IHC’s exclusive financial advisor in connection with the transaction. Proskauer Rose, led by Jeffrey Horwitz, was the transaction counsel for IHC. More details in the press release.

This is the second acquisition in India by a blank check firm. Last month, Millennium India Acquisition Company announced the acquisition of 14.9 per cent in Delhi-based broking firm SMC for $40 million.

Related:

Navis Picks Up 74% In Sanjay Narang's Mars Restaurants

Navis Capital Partners Acquires Delhi Fast Food Chain Nirula's