Mahindra Holidays acquires 18% stake in Finnish firm

Deal worth Rs 106 crore signed with Holiday Club Resorts, a major vacation ownership company

In a major expansion move, Mahindra Holidays & Resorts (MHRIL) has entered into a deal with the shareholders of Finland-based Holiday Club Resorts Oy to acquire 18.8 per cent shares. In addition, the deal has also entitled MHRIL the right to increase its ownership in the company in two years.

The Mumbai-based company will pay euro 13 million (Rs 106 crore) for the stake, with a primary infusion of euro 3 million (Rs 24.4 crore) followed by a secondary infusion of euro 10 million (Rs 81.5 crore) for the existing shareholders. Both the parties have agreed to lock in the purchase price of the balance shares that would have to be bought before September 2016.

Holiday Club is a leading vacation ownership company in Europe having 32 resorts and around 2,800 rooms. Though the Finnish company's inventory is larger than MHRIL (41 resorts and 2,500 rooms), it has only 50,000 members, compared to MHRIL’s 171,000.

ON A EUROPEAN HOLIDAY

euro 13 million (Rs 106 crore) Amount paid by Mahindra Holidays for the acquisition,
32 resorts & 2,800 rooms Inventory of Holiday Club
41 resorts & 2,500 rooms Inventory of MHRIL
50,000 No. of members in Holiday Club
171,000 No. of members in MHRIL
62% Stake value of private investors, down from 74%
18% Stake value of employees, down from 26%

6,000 rooms Combined inventory strength of the two companies targeted in 18 months
Arun Nanda, chairman, Mahindra Holidays said, "This opportunity knocked at our door a few months ago. The acquisition will be a base to look at opportunities in Europe and also a stepping stone to become a world major in the vacation ownership model".

After the stake buy, share of private investors who hold 74 per cent stake in the unlisted Finnish company will come down to 62 per cent, while the 26 per cent held by employees will drop to 18 per cent.

Initially, MHRIL will get one seat in the board of Holiday Club. This will increase gradually with rise in its stake in the latter.

For the six months ended March 31, Holiday Club reported turnover of euro 69 million, while the estimated profits for the same period stood at euro 3.8 million. The consolidated turnover of the company during 2012-13 was at euro 120 million. It has 830 employees spread across Russia and Sweden, apart from home country Spain.

Nanda added, "The most interesting aspect of this company is that despite the economic slowdown, it has managed to be profitable. It returned with 10 per cent Ebitda (earnings before interest, taxes, depreciation, and amortisation). Though we have signed the purchase agreement today (on Monday), the deal is expected to close in 30 days".

MHRIL said the target company would operate independently and ruled out any rebranding of the company. Its members, however, will have the benefit to tap into the inventory of MHRIL and vice versa. The combined inventory strength of the two companies will be 6,000 rooms within 18 months.

Once the full ownership is achieved, the combined entity has the potential to become the largest vacation ownership company in the world, outside the US.

Currently, Holiday Club is owned by acting management, Varma Finnish Industry Investment, Ilmarinen, the Fennia Group and a group of Finnish private investors.