NEW DELHI, Jan 10: Lemon Tree Hotels on Saturday said its board has approved Warburg Pincus’ acquisition of 41.09 per cent stake of APG Strategic Real Estate Pool NV in its subsidiary Fleur Hotels and an investment of Rs 960 crore in tranches.
The acquisition will be done by Coastal Cedar Investment BV, an affiliate of Warburg Pincus. Lemon Tree Hotels board has approved the execution of a share purchase agreement enabling the acquisition by Coastal Cedar, a regulatory filing said.
The company’s board has also approved execution of an agreement providing for a primary investment of up to Rs 960 crore by Warburg Pincus in tranches, to support the future growth of Fleur, which will be listed separately on the exchanges.
In a regulatory filing, Lemon Tree said the strategic reorganization and investment from Warburg in Fleur will unlock long-term shareholder value by creating two focused, high-growth, and large-scale platforms.
The proposed reorganization will create two clearly differentiated and complementary platforms: Lemon Tree Hotels Limited, as a pure-play, asset-light hotel management and brand platform; and Fleur Hotels Limited, as a large-scale growth-oriented hotel ownership platform with development capabilities and an attractive pipeline.
The respective boards of Lemon Tree and Fleur approved a composite scheme of arrangement designed to simplify the group structure, enhance strategic focus, and unlock long-term value for shareholders, it said.
The scheme is subject to regulatory and shareholder approvals.
This investment marks a renewed partnership between Warburg and Lemon Tree, following Warburg’s earlier investment in the company in 2006, which supported the latter’s initial growth.
“The scheme, to be implemented through an NCLT-approved process, will reorganise the group’s asset ownership and operating structure. The hotel assets currently owned by Lemon Tree will be transferred to Fleur, which will serve as the group’s exclusive asset ownership and development company,” Lemon Tree stated.
Fleur will lead the group’s all future hotel acquisitions and development, while Lemon Tree will transition to a fully asset-light model, focused on growing its hotel management, franchising and digital business, it added.
The scheme will also result in a listing of Fleur’s shares on NSE and BSE. Patanjali Govind Keswani, Founder of Lemon Tree Hotels, will serve as the Executive Chairman of Fleur Hotels and will eventually transition to a Non-Executive role at Lemon Tree.
“This scheme is intended to create a simplified, transparent, and growth-oriented structure for both companies, which we believe will enhance long-term value for our shareholders,” Keswani said.
Anish Saraf, Managing Director, Warburg Pincus, said, “Lemon Tree has played a pioneering role in shaping India’s mid-market hospitality segment, building a large scale, high-quality portfolio with strong brands and operating capabilities. With favourable industry fundamentals and a clear strategic roadmap, we look forward to supporting the team as they continue to scale the business.”
Under the scheme, Lemon Tree will merge two of its wholly-owned subsidiaries — Carnation Hotels and Hamstede Living — with itself. Four wholly- owned subsidiaries of Lemon Tree — Oriole Dr. Fresh, Sukhsagar Complexes, Manakin Resorts and Canary Hotels — will be merged with Fleur against the issuance of shares by Fleur to Lemon Tree.
Moreover, 12 hotels (11 operational hotels and one under-construction hotel at Shimla) of Lemon Tree together along with the investment in one under construction hotel in Shillong through a 100 per cent subsidiary of Lemon Tree, will be demerged with Fleur.
The entire process of listing of Fleur is expected to be completed within 12 to 15 months.
Post the proposed transaction, Fleur will become one of the largest owners of hospitality assets in India. Its owned portfolio will expand significantly, increasing from 3,993 keys and 24 operating hotels to 5,813 keys across 41 hotels, Lemon Tree said.
Lemon Tree will continue to operate its existing leased hotels in Indore and Aurangabad, which are approaching the end of their respective lease terms. In addition, Lemon Tree will manage an additional 1,820 keys and 17 hotels transferred to Fleur alongside its existing portfolio of 3,993 keys and 24 hotels of Fleur operated by Lemon Tree. (PTI)
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