Mahindra Holidays buys 18.8% initial stake in Finland’s Holiday Club

Mahindra Holidays & Resorts India Ltd today said it has signed definitive agreements with the shareholders of Finland-based Holiday Club Resorts Oy to acquire 18.8 per cent of its shares, with a right to increase its ownership over a period of two years.

The Mumbai-based vacation-share outfit will pay €13 million for the stake, including a primary infusion of €3 million. This will be followed by the balance of €10 million as secondary infusion to existing shareholders.

Both parties have agreed to lock in the purchase price of the balance of shares, which would have to be bought before September 2016.

Holiday Club is among the leading vacation ownership company in Europe, with 32 resorts and nearly 2,800 rooms. The Finnish company's inventory is bigger than MHRIL (41 resorts and 2,500 rooms), but it has only 50,000 members as compared to 171,000 members of MHRIL.

Arun Nanda, chairman, Mahindra Holidays said, "This opportunity knocked at our door a few months ago. The acquisition will act as the base to look at opportunities in Europe and also the stepping stone for our ambition to become a world major in the vacation ownership model."

The share of private investors, who hold 74 per cent stake in the unlisted Finnish company, will come down to 62 per cent while that of employees, who hold 26 per cent, will drop to 18 per cent after the MHRIL stake buy. MHRIL will initially get one seat on the board of Holiday Club, but this will rise with an increase in its stake.

For the six months ended 31 March 2014, Holiday Club reported turnover of €69 million, while its estimated profits for the same period stood at euro 3.8 million. The company has 830 employees spread across offices and properties in its home country, Spain, Russia and Sweden.

During 2012-13, the consolidated turnover amounted to €120 million.

"The most interesting aspect of this company is that despite the economic slowdown it has managed to stay profitable. It returned with a 10 per cent EBITDA. Though we have signed the purchase agreement today we are expecting to close the deal in 30 days," said Nanda.

Members of Mahindra Holidays and Holiday Club will enjoy mutual sharing rights on resorts. The combined inventory strength of the two companies will be in excess of 6,000 rooms in the next 18 months.

Once full ownership is achieved, the combined entity has the potential to become the largest vacation ownership company in the world, outside the US. Holiday Club is owned by its acting management, Varma Finnish Industry Investment, Ilmarinen, the Fennia Group and a group of Finnish private investors.