Canadian investment firm Brookfield Asset Management Inc. is a step closer to acquiring Hotel Leelaventures Ltd as the Securities Appellate Tribunal (SAT) rejected an appeal by ITC Ltd to stop the deal which was finalised earlier this year.
The SAT order said, “We find that there is no merit in appeal filed by ITC Ltd. However, the appeal by J.M. Financial Asset Reconstruction Co. Ltd (JMFARC) will have to be allowed”.
The Canadian investor had inked a pact with the Mumbai-based luxury hotel in March to acquire four Leela hotels and hospitality business for Rs 3,950 crore ($576 million then).
Cigarette-to-hotels firm ITC, which holds 7.92% stake in debt-laden Hotel Leelaventures, had filed an appeal with SEBI and the National Company Law Tribunal (NCLT) against the deal citing allegations of oppression of minority rights against the hotel company, its promoters and JMFARC.
In its order, the appellate tribunal dismissed suggestions of any “related party” transactions in the deal, including technical breach of the Takeover Regulations. This implies that the capital markets regulator has now allowed JMFARC, which owns 26% equity in Hotel Leela, to vote on the deal.
After the judgment was pronounced, ITC’s counsel Somasekhar Sundaresan sought to file an appeal before the Supreme Court.
Meanwhile, JMFARC, Hotel Leelaventures and the promoters have decided to file the caveat petition in the Supreme Court.
A month after the deal was announced, ITC approached SEBI and the NCLT against the deal. State-run Life Insurance Corporation (LIC) also challenged the acquisition. Both ITC and LIC, which cumulatively own a stake of about 10% in Hotel Leelaventure, voted against the deal. Following this, SEBI put the deal on hold in April.
In July, SEBI ordered Hotel Leela to conduct a shareholder vote, seeking approval for the multi-million-dollar sale of assets to Brookfield.
Accordingly, the hospitality firm issued fresh postal ballot notices to its shareholders on August 13, with planned to declare results on September 18.
However, this month SAT asked to put the vote on hold until it heard the order.