Online travel firm MakeMyTrip will obtain challenger ibibo in an equity deal that will create one of the leading travel groups in India. South Africa’s Naspers and China’s Tencent Holdings are selling ibibo Group to MakeMyTrip in exchange for an issuance of new shares by MakeMyTrip, the company said in a statement.
Upon closing of the transaction, MakeMyTrip will own 100 percent of ibibo Group. Naspers and Tencent will become the single largest shareholder in MakeMyTrip, owning a 40 percent stake and will contribute proportionate working capital upon closing, it added. Additionally, prior to closing, a $180 million, 5-year convertible notes issued by MakeMyTrip to Ctrip.com International Ltd in January 2016 will also be converted into common equity, resulting in Ctrip having an approximately 10 percent stake in the combined entity, it added. The transaction is expected to close by the end of December 2016 and is subject to approval by MakeMyTrip shareholders and regulatory approvals.
The merged entity will make the going tough for rivals Cleartrip and Yatra. MakeMyTrip has been the strongest player in the online airline ticketing space. Ibibo’s core strength, too, is airline ticketing, but it has a particularly strong presence in online bus ticketing, following its acquisition of redBus in 2013. All the merged entity’s brands together processed 34.1 million transactions in FY2016.
Group CEO Deep Kalra, MakeMyTrip founder and India CEO Rajesh Magow and Ibibo Group Founder and CEO Ashish Kashyap spoke exclusively to ET and outlined the reasons behind the consolidation, the way forward for the merged entity and the growing focus on the hotels space.
“With the combined entity having around 60% market share of the approximately 100,000 online daily hotel room nights sold in the country, the MakeMyTrip-Ibibo merger signals a big shift in the balance of power. Margin pressure will reduce significantly, allowing MakeMyTrip to invest in growing the overall market,” the analyst said.
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