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MakeMyTrip and ibibo to merge in an all-stock deal

19 October 2016

MakeMyTrip Ltd, the Nasdaq-listed travel portal, has agreed to buy smaller rival ibibo Group, which is co-owned by South African technology group Naspers Ltd and Chinese investment firm Tencent, in an all-stock deal.

Naspers and Tencent, which own 91 per cent and 9 per cent, respectively, in ibibo Group will sell the firm to MakeMyTrip, in the biggest consolidation in the online travel agency (OTA) segment in India.

Naspers and Tencent will own 40 per cent stake in the combined company under the scheme of arrangement, with Naspers owning 36 per cent, the company said in a statement.

Naspers, which also owns around a sixth of India's biggest online marketplace, Flipkart, will be the single largest shareholder of the combined entity, the country's top OTA.

Naspers also owns the country's top bus ticketing venture redBus, which makes it the top player in India's OTA market.

For MakeMyTrip, which has a strong position in the air ticketing business, the new deal will give better access to fast growing travel segments such as hotel booking and bus ticketing through ibibo Group's brands goibibo and redBus.

''The combination will bring together a bouquet of leading consumer travel brands, including MakeMyTrip, goibibo, redBus, Ryde and Rightstay, which together processed 34.1 million transactions during FY2016,'' MakeMyTrip, which went public on NASDAQ in 2010, said.

Following the closing of the transaction, MakeMyTrip founder Deep Kalra will remain group chief executive and executive chairman and co-founder Rajesh Magow will continue to remain chief executive (India) of MakeMyTrip. Founder and chief executive of ibibo Group, Ashish Kashyap, will join MakeMyTrip's executive team as a co-founder and president.

''We expect this deal to create an even more scalable business with the expertise to transform the booking experience for Indian travellers,'' said Deep Kalra, chairman and group chief executive of MakeMyTrip.

MakeMyTrip is already the largest OTA in the country and the merger will strengthen its position while toning down the cut throat competition in the business.

The merger of ibibo will save MakeMyTrip of the fierce competition in pricing in the hotels category, although competition from Yatra, Cleartrip and, etc will remain.

The hotels booking business has several online aggregators, including Oyo Rooms.

The deal will allow MakeMyTrip to take on Yatra, which is in the process of getting listed in NASDAQ.

Earlier this year, MakeMyTrip had entered into an agreement with fellow NASDAQ-listed firm International Ltd, under which the Chinese travel services firm had agreed to invest $180 million (Rs1,200 crore) through convertible bonds into the online travel agency.

Now the five-year convertible notes will also be converted into common equity, resulting in Ctrip having an approximately 10 per cent stake in the combined entity.

Other significant shareholders of MakeMyTrip include SAIF Partners, T Rowe Price, Tiger Global and company founder and CEO Deep Kalra.

The transaction is expected to close by the end of December 2016 and is subject to approval by MakeMyTrip shareholders and regulatory approvals.

Morgan Stanley is acting as exclusive financial advisor to MakeMyTrip and has also provided a fairness opinion to its board. Latham and Watkins, S&R Associates and Appleby are acting as legal advisors to MakeMyTrip. Goldman Sachs is acting as exclusive financial advisor to ibibo and Naspers, while Cravath, Swaine & Moore, Trilegal and BLC Roberts are acting as legal advisors.

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