11 June 2019: ITC has said it has not made any offer to acquire the assets of Hotel Leela venture, putting to rest speculation that it is keen to acquire the assets at a lower cost being a competitor, and which is why it has thrown a spanner in the Brookfield deal.
It will be communicated to the NCLT which will hear the Leela venture case on June 18, two senior industry executives said. The Securities and Exchange Board of India (Sebi) had in April stalled Brookfield’s takeover of key Leela properties, sending the deal under investigation, after ITC, which owns 7.92% in Hotel Leela venture, and Life Insurance Corporation, which has 2.38%, filed complaints.
ITC had also challenged the transaction in NCLT, claiming mismanagement and oppression of minority shareholders by the way the deal was structured.
The executives said ITC is not interested in taking on the huge debt of Leela on its books and does not see any value of capacity expansion through buying Leela assets.
ITC will, instead, press for proper return on investment for the minority shareholders. The deal, it feels, is structured in such a way that Leela venture will become a shell entity with just one disputed property in Mumbai, deriding the value of minority shareholders, the executives said. Even the company will lose the right to use Leela brand name as it has communicated to the bourses, they said.
“The matter is sub-judice, and hence, we will not be able to comment,” an ITC spokesperson said in an emailed response. “However, we wish to categorically state that ITC has not made any offer to JM Financial for the assets of Leela. Such wrong information is being circulated with mischievous intent by vested interests to influence outcomes.”
JM Financial, the parent of JM Financial Asset Reconstruction Company that holds 26% in Leela venture after conversion of debt into equity, had acted as the exclusive financial advisor for the deal.
Leela venture, which has a debt of around Rs 7,500 crore, announced in March that Canadian alternative asset management company Brookfield had agreed to buy its key properties in New Delhi, Bengaluru, Udaipur and Chennai for Rs 3,950 crore in a slump sale. The promoters and their affiliates would get a consideration of Rs 300 crore for any asset-related intellectual property rights they hold and for business expansion services that they provide to the investor.
Emails sent to JM Financial and Leela venture on whether ITC had expressed an interest in acquiring Leela venture assets did not elicit any response till press time Monday.
A section of the industry, however, feels ITC had spoiled the deal. The CEO of a hotel chain said that filing an objection at such a stage was clearly done with an intent to sabotage the deal.