Domestic hospitality major Sarovar Hotels & Resorts has agreed to allow its investors to divest 30 per cent equity stake they own in the company only if that gets an enterprise value of Rs 400 crore (about $60 million), the Hindu Business Line reported citing a senior executive.
The hotel chain, promoted by Anil Madhok and Ajay Bakaya, is reportedly in talks with US-headquartered Wyndham Hotel Group to sell up to 30 per cent stake owned by Bessemer Venture Partners Trust and New Vernon Private Equity.
At this valuation, the two investors will be able to pocket around Rs 120 crore (approximately $20 million). Bessemer Venture Partners and New Vernon Private Equity had together invested Rs 38 crore in Sarovar Hotels for a 30 per cent equity stake in 2005.
Separate emails sent to Sarovar Hotels, Bessemer Venture and New Vernon Partners seeking further information on the development did not elicit any response by the time of filing this article.
The hotel chain, revenue of which comes from the management fee it charges across its 70 properties, has no plans to sell additional stake from the promoters.
Founded in 1994, privately owned Sarovar Hotels is the third-largest hotel chain in India with 70 properties across India and overseas. It manages, franchises and markets hotels and resorts under the Sarovar Premiere, Sarovar Portico, Hometel, Park Plaza & Park Inn brands.
Currently, Wyndham Hotel Group operates 25 properties for brands such as Ramada, Howard Johnson and Wyndham across the country.
“There were offers in the past but we were not ready. Even now we are not exactly desperate and it is up to the PE firms to decide if they want to exit. But the hospitality industry is ready for consolidation as indicated by the recent Marriott and Starwood deal,’’ Madhok told the paper.
It may be noted that Marriott International, which operates over 4,000 properties globally, announced last week that it will buy Starwood Hotels & Resorts in a $12.2 billion (£8 billion) cash and stock deal.
The combined company will include the Sheraton, W Hotels and Ritz-Carlton brands and will have more than 5,500 hotels, with more than one million rooms.