Ebix has given Yatra a week's time to begin due diligence.
Online travel service provider Yatra is reviewing the proposal from Ebix Inc to acquire all the outstanding shares of the company, it said in a statement late Monday.
"Consistent with its fiduciary duties, and in consultation with its independent legal and financial advisors, the company’s Board of Directors will review and consider the proposal to determine the course of action that it believes is in the best interest of the company and all of its shareholders. Company shareholders do not need to take any action at this time," it said in a statement.
Citi Group Global Markets Inc. is acting as financial advisor to the company and Goodwin Procter LLP is acting as legal counsel.
Earlier on Monday, software and e-commerce services provider Ebix announced that it had proposed to acquire Yatra Online for $7 per share on debt free basis. The total consideration of the deal would be $336 million.
The offer represents 84 percent premium to Yatra Online's closing share price of $3.80 as of March 8. The company's stock traded between $3.70 to $8.16 in the last 12 months.
According to industry experts, given the impressive premium, Yatra will find it difficult to refuse the offer.
Yatra has been given the option to accept the deal either in cash or in the form of freely tradeable Ebix stock. In case Ebix pays for the acquisition in Ebix stock, the stock will carry a minimum collar value of $59 per Ebix share, calculated by dividing the total acquisition price payable to Yatra shareholders by the 10-day average price of the Ebix stock, preceding the closing date. Ebix stock will be converted at a minimum value of $59 in case the 10-day average price of the Ebix stock, preceding the closing date is less than $59.
Also, in that case Ebix will offer all Yatra shareholders a downside cover on the Ebix stock issued by allowing them to sell Ebix stock back to Ebix in the 25th month after closing, at the discretion of each Yatra Online shareholder, at a fixed price that would be 10% lower than the price at which Ebix stock is issued to them.
With this deal Ebix aims to create an end-to-end enterprise financial and insurance services player: It claims that the merged entity would become one of India’s largest and most profitable end-to-end travel industry player in the insurance services industry, providing distribution, travel insurance, forex and visa services, among other things all under one roof.
According to Ebix, Yatra Online can generate revenues upwards of $150 million per year with over 30 percent operating margins on a post-closing basis, within 6 months of the acquisition by Ebix.
"We believe that Yatra Online’s products and services are complementary to EbixCash’s travel portfolio of Via and Mercury; and a combination of the two companies would lend itself to significant synergies and the creation of the India’s largest and most profitable travel services company. We see substantial synergies, economies of scale and expanded growth potential for the combined business. Our interest in making an offer for Yatra Online is also borne out of our firm belief that a combination of the two companies could be substantially and immediately accretive to Ebix's EPS," said Robin Raina, chairman, president and chief executive officer of Ebix.
Ebix has given Yatra a week's time to allow them to begin due diligence. It has stated that it could reduce the offer if it did not receive "a positive engagement response from the Yatra Online Board in a timely manner or if any subsequent steps are taken by the company that could have an adverse impact on its future value."
The development happens over two years after the OTA segment saw one of the biggest consolidation of the travel industry with MakeMyTrip acquiring rival GoIbibo. Yatra faces a huge competition from the combined entity now.
In the last couple of years, the sector has also witnessed growth of younger companies such as Oyo which recently announced $1 billion funding round led by existing investor SoftBank.
There was no immediate clarity on what happens to Yatra's employees if the deal gets finalised.
In November, Moneyontrol had reported that Yatra was laying off 270 employees, around 10 percent of its total workforce. The company planned to outsource non-core processes such as relationship sales and post sales to third-party agencies with an aim to reduce the overall cost.
Yatra claims to have over 800 corporate customers, 100,000 hotels in India and 10,00,000 hotels around the world on its platform. Founded in August 2006, Yatra completed its reverse merger with Terrapin 3 Acquisition Corp in 2016 post which it started trading on Nasdaq.Disclamer: Network 18 holds a minority stake in Yatra.