The online travel agency (OTA) space in India has just had one of its biggest consolidations yet. South Africa’s Naspers and China’s Tencent Holdings are selling ibibo Group to MakeMyTrip in exchange for an issuance of new shares by MakeMyTrip (listed on NASDAQ), the company said in a statement.
Naspers-TenCent combine will become the single largest shareholder in the combined, listed entity, with 40% stake. Chinese OTA CTrip, which invested $180 million into MakeMyTrip in January 2016, will own around 10% stake in the entity following the merger. The transaction is expected to close by December 2016 and is subject to shareholder and regulatory approvals: the regulatory approval should be interesting, because these are effectively the two largest OTA’s in India.
Naspers' Indian travel business, Ibibo Group has entered into a transaction with MakeMyTrip (MMYT) to combine the two businesses under MMYT
— Naspers (@Naspers) October 18, 2016
The combination will bring together a bouquet of leading consumer travel brands, including MakeMyTrip, goibibo, redBus, Ryde and Rightstay, which together processed 34.1 mm transactions during FY2016. The other competitors in this space include Yatra Online Inc, Cleartrip and Via.com, among others.
MakeMyTrip shares rose more than 42% on NASDAQ in early trades on Tuesday, valuing the company at about $1.2 billion.
MakeMyTrip founder Deep Kalra will remain group chief executive and executive chairman of MakeMyTrip Group and co-founder Rajesh Magow will continue to remain chief executive of MakeMyTrip India business. Founder and chief executive of ibibo Group, Ashish Kashyap, will join MakeMyTrip’s executive team as a co-founder and president of the organization, the statement added.
Today’s announcement is a significant step forward for the rapidly growing travel industry in India. We expect this deal to create an even more scalable business with the expertise to transform the booking experience for Indian travellers. I am delighted to be leading such a strong team in our next chapter of high-growth in this dynamic industry. Deep Kalra, chairman and Group chief executive of MakeMyTrip.
Being the biggest merger in the spacee and that too of the two big giants, the closing of the acquisition by December 2016 might be tricky.
Interestingly, this is the second major change from Naspers in India in recent times, after it bought CitrusPay to run PayU. There is a shift in strategy by Naspers in India and with with this deal announced they no longer have an operational entity in the nation. While that could raise a few eyebrows, here is what Naspers’ CEO Bob van Dijk said about the deal:
India is a key market for Naspers and this deal reinforces our commitment to the country. ibibo and MakeMyTrip have built leading companies through their innovative use of technology to create exceptional experiences for people traveling throughout India and, increasingly, beyond.
While the deal will make the competitors sweat, it will be interesting to see as to how they respond.