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Business – Max India’s Analjit Singh to own lion’s share of EIH

Arun Kumar

NEW DELHI: Max India’s Analjit Singh is poised to become the biggest shareholder in EIH and join the founding Oberoi family as co-promoter and Analjit Singh, Max India
vice-chairman of India’s third-largest hotel chain, two executives with direct knowledge of the development told ET.

A deal, likely to be finalised early next month, will result in Mr Singh owning a little over 26% in EIH, the operator of the Oberoi and Trident brands and the third-largest hotel chain behind Indian Hotels and ITC. Together, Mr Singh and the Oberoi family will own a 52% stake in EIH, likely fending off any possibility of rival ITC — also a big shareholder in EIH — attempting to gain control.

The Oberoi family, which owns 43% in EIH, will sell a little over 17% to Mr Singh for up to Rs 1,250 crore, valuing the company at more than Rs 7,200 crore. Along with Mr Singh’s shareholding through purchases in the open market, his stake will rise to 26%.

Mr Singh and EIH chairman PRS Oberoi have already signed a non-disclosure pact, with due diligence for a final deal currently under way, a source said. Officials from ITC, which owns a shade under the 15% limit which would have triggered an open offer, could not be reached. An EIH representative said the company “is not aware of such a transaction by the promoters” while Mr Singh did not reply to e-mail questions.

Once a deal is finalised, Mr Singh will make the mandatory open offer for an additional 20% stake at a price expected to be between Rs 165 and Rs 185 per share, an executive aware of the plan said. Government-run insurers LIC, New India Assurance and GIC together own a little over 10% in EIH while Reliance Capital’s holding is a shade over 2%.

The move to rope in Mr Singh as co-promoter is aimed at blocking any potential hostile bid from a domestic or foreign company, said an official close to the EIH Group. The founders were looking to bring in a strategic partner after ITC increased its holding to 14.98% from 14.96% since December 2008.

The Oberoi Group, founded in 1934, operates 27 hotels under the luxury Oberoi and five-star Trident brands. Its other businesses include in-flight catering, airport restaurants, travel and tour services, car rentals, project management and corporate air charters.

Mr Singh, who has built and sold many businesses, the most notable of which was his exit from mobile operator Max Telecom to Hong Kong’s Hutchison Whampoa, is seen as a “perfect fit” as a co-promoter. A serial entrepreneur, he runs the Max Group, which has interests in consumer-facing businesses such as telecom, healthcare and insurance. “The combined holding of two — Mr Singh and Mr Oberoi — will be upwards of 52%. At the same time, Mr Singh would not be involved in day-to-day affairs of the company,” he added.

Mr Singh recently joined hands with EIH to set up a 100-room five-star hotel in Dehradun under the Trident brand. The deal, another executive close to EIH said, is a “natural extension of the relationship”. Officials said Mr Singh is buying the stake in his personal capacity and his flagship company Max India is not participating in the transaction. He is currently engaged in mobilising resources to finance the deal.

A senior executive with a leading investment bank said Mr Singh has already got firm commitment from investors for around Rs 1,150 crore. The Max India promoter is divesting a 49% stake in Capricorn Hospitality Services, an investment company of the promoters, to private equity firm — NSR Direct — for Rs 600 crore. NSR Direct is an affiliate of leading private equity firm New Silk Route partners.

Capricorn Hospitality has already approached the foreign investment promotion board for approval to divest 49% to NSR Direct. In addition, Mr Singh is divesting a 49% stake in another investment firm that owns a 7.33% stake in Vodafone Essar to the British telecom group to mop up Rs 533 crore. To finance the open offer, Mr Singh is currently in negotiations with some of the foreign banks to raise debt to bridge finance the transaction.

October 15, 2009 - Posted by | Uncategorized |

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