VC-backed travel portal Yatra scraps merger with Ebix, initiates litigation in US Court
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Nasdaq-listed Yatra Online, Inc. has filed a lawsuit against Ebix Inc. in a US court over breaches of merger agreement a little less than a year after the software firm agreed to acquire the Indian online travel services company in a cash-and-stock deal.

Gurugram-based Yatra said it sent a notice of termination of the pending merger with Ebix and filed litigation in a court in the State of Delaware. The complaint seeks to hold Ebix accountable for breaches of its representations, warranties and covenants in the merger agreement and an ancillary extension agreement besides seeking substantial damages.

“Ebix's conduct breached material terms of the agreements and frustrated Yatra's ability to close the transaction and obtain the benefit of Yatra's bargain for Yatra's stockholders,” it said.

Ebix, which is also listed on the Nasdaq, had offered to acquire Yatra at an enterprise value of $336 million (around Rs 2,350 crore then) and a net equity value of $239 million to boost its portfolio of Indian travel ventures. Ebix had in October 2017 acquired online-to-offline travel agency Via for $75 million.

The proposed deal, which was to close on or before April 12, 2020, got stretched. The deadline was first extended to April 27 and then to for April 30. A third extension was signed on May 1 to consummate the deal by May 4. This was again extended to June 4 to provide the parties with time to determine whether they can reach a mutual agreement on an amendment of certain terms of the merger agreement. The final deadline lapsed earlier this week and led to nixing of the deal.

Atlanta-based Ebix offers software and provides e-commerce services for the insurance, financial, healthcare industries. Its unit EbixCash had acquired Mumbai-based Mercury Travels and Delhi-based Leisure Corp last year with an aim to create a travel division focused on luxury, events and sports-related travellers.

Yatra was founded in 2006 by former Ebookers Group (UK) executives Dhruv Shringi, Manish Amin and Sabina Chopra. It is India's second-largest online travel services company behind MakeMyTrip.

The company attracted funding from various investors including Network 18 (now part of Reliance Industries), Reliance Capital (Reliance Group), Norwest Venture Partners, Intel Capital, Chiratae (formerly IDG Ventures) and Temasek’s VC arm Vertex. Some of these investors like Reliance Capital had exited their stake in the past.

Yatra operates in India through Gurugram-based unit Yatra Online Pvt. Ltd.

Through a separate announcement late on Friday, Yatra assured its shareholders and stakeholders of sufficient strategic and financial resources required under the ongoing pandemic situation to continue its strategy to consolidate the corporate travel services sector in India.

“Yatra believes it has a strong financial position to support the company over the coming quarters,” stated a press release, adding that the company has total available liquidity of $32.5 million in contrast to its current monthly run-rate operating fixed cost of approximately $1.2 million excluding any litigation-related expenses.

In July 2016, Yatra had signed a reverse-merger agreement with US-based special purpose acquisition company Terrapin 3 Acquisition Corp, which was listed on the Nasdaq, paving the way for a back-door listing of the second Indian online travel services provider in the US after MakeMyTrip.

Yatra has lost over four-fifth of its value since it went public and is currently valued at just $68.4 million after seeing its share price jump 17% on Thursday. Yatra’s share price cracked by two-thirds since it announced a plan to merge with Ebix last July.

For the nine months ended December 31, 2019, Yatra reported a 16% decline in revenue to Rs 597 crore while its net loss doubled to Rs 65 crore. In the same period, MakeMyTrip's revenue rose over 11% to $405 million. While Yatra saw revenues decline from both air ticketing and hotels booking, the pain was much more in the latter.

Yatra has been one of the top OTAs in India for several years in a market dominated by MakeMyTrip. The market has seen consolidation in the past including acquisition of Travelguru by Yatra, GoIbibo by MakeMyTrip and Via by Ebix.

Yatra is among those like Cleartrip and EaseMyTrip that stand separate even as payment service providers and even horizontal e-commerce giants like Amazon and Flipkart have been trying to build a presence in tie-ups with existing OTAs.

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