Thomas Cook approaches Bay Capital-backed Sterling Holiday Resorts for a deal

Fairfax-controlled travel services agency Thomas Cook is one among a bunch of investors who have approached timeshare hospitality firm Sterling Holiday Resorts India, the company disclosed on the stock exchanges on Tuesday.

It was responding to a report in The Economic Times earlier in the day which said Thomas Cook is looking to invest in the public-listed firm. The report said Thomas Cook has offered to buy shares of the company at Rs 125 per share or a premium of around 36 per cent to the market price. It did not say if some of the investors of Sterling Holiday will sell shares in the impending transaction or there will be fresh investment into the company.

Sterling Holiday is backed by Bay Capital which had originally invested around Rs 33.5 crore way back in 2009 in two tranches through preferential allotment which gave it around 22 per cent stake. This had triggered an open offer which was not successful and given further equity issues, Bay Capital held around 19.4 per cent as of end 2010.

It started buying more shares in the company starting 2011 which continued till the first quarter of 2012. It is estimated to have put in around Rs 33-35 crore more through market purchases. As of December 31, 2013 it held around 21.8 per cent of Sterling Holiday. This is currently worth Rs 137 crore or around twice the investments made by Bay Capital.

Other shareholders of the company include billionaire investor Rakesh Jhunjhunwala (3.67 per cent) and the company’s managing director Ramesh Ramanathan (who owns 2.86 per cent) among others. The promoters of the firm own 11.58 per cent.

Sterling Holiday competes with Mahindra Holidays and Resorts, which is also public listed firm and the largest player in the timeshare segment.

If indeed Thomas Cook strikes a deal it would move from being an enabler in the hospitality space to an operational firm in the business. The travel agency is presently controlled by Canada’s Fairfax which had acquired majority stake in the firm sometime back.

Post that the firm has gone ahead and diversified its business by acquiring a HR consulting outfit Ikya. Fairfax has been looking to use Thomas Cook’s platform to enter new businesses. At present, Thomas Cook is present in 253 locations in 101 cities across India.

(Edited by Joby Puthuparampil Johnson)

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