Has a fixed price option to hike stake to 100 %

Mahindra Holidays & Resorts (MHRIL) has signed agreements to acquire 18.8 per cent stake in Finnish vacation ownership company, Holiday Club Resorts Oy (HCR), for a consideration of 13 million euro. As per the agreement, MHRIL can increase its stake over a two-year period.

With a membership base of 50,000 families, HCR is a leading vacation ownership company in Europe with 32 resorts — 24 in Finland, 2 in Sweden and six in Spain.

MHRIL has 171,000 members with 41 resorts across India and overseas.

Initially, MHRIL will invest 3 million euro and 10 million euro as the secondary buy-out. While 74 per cent of HCR’s equity is owned by private investors, the rest are held by employees. Post MHRIL buying 18.8 per cent, private investors’ stake would come down to 62 per cent and employees’ to 18 per cent.

In a statement, Anand Mahinda, Chairman, Mahindra Group, said, “This timely acquisition not only provides access to European assets, technology and processes, but, more importantly, provides a springboard to MHRIL for growth in Europe and other international destinations.”

Addressing media, Arun Nanda, Chairman, MHRIL, said, “We have a fixed price option up to September 2016 to hike stake to 100 per cent, and intend to go to at least 90 per cent. We would like their management to continue to own 10 per cent. Both the brands will remain for now.”

On the benefits of the acquisition, he said that the combined entity could become the largest vacation ownership company outside of the U.S. “We can use HCR’s network to reach out to a huge NRI population. Besides, we can use the base to look at other opportunities in Western Europe where a large number of Indians travel.”

Despite the meltdown in Europe, HCR has been profitable with an operating margin above 10 per cent. “They have a frugal cost base. They build resorts in 6-8 months, and we take up to two years. So, we can learn things about their modular designs,” Mr. Nanda said.

On the Bombay Stock Exchange on Monday, MHRIL gained Rs.9.5 (2.97 per cent) to close trading at Rs.329.25.

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