M&A Critique

Yatra terminates deal with Ebix

In a deal that went off the rail, Yatra Online – the country’s online travel booking company – has pulled out of the merger agreement with US software firm Ebix. The travel portal has also filed litigation against Ebix for breach of agreement terms and is seeking damages. Ebix is also considering all options, including a counter-suit against Yatra. According to Yatra, Ebix breached its representations, warranties and covenants in the merger agreement and an ancillary extension agreement. The transaction would have created India’s largest and most profitable travel services company.

To save the deal, Yatra Online in May had filed to the US Securities and Exchange Commission that both the parties have agreed to extend the date to reach mutual agreement on an amendment of certain terms of the Merger Agreement to June 4. However, that did not happen and the deal failed. In a separate statement, Yatra had underlined that as of June 4, 2020, the company has over Rs 240 crore in total available liquidity. The company’s current monthly operating fixed cost is around Rs 8 crore.

The termination of the deal does not bode well for future deals in the sector, especially as the Covid-19 pandemic has hit the travel industry hard and cash-flows have been affected. Though internal disputes could be one of the reasons for the failure of the deal, the impact of Covid-19 could longer than anticipated as people across the globe will keep on hold their travel plans, and airlines and hotels will have to wait for months to get back to the pre-Covid level consumer demand. The travel and tourism industry will have to devise new strategies to revive business as it will take a longer time for the industry to revive.

The derailed deal

In July last year, US software firm Ebix had proposed to acquire Nasdaq-listed Yatra Online Inc to boost its India travel ventures at an enterprise value of $336 million, or Rs 2,350 crore in an all stock deal. It was supposed to be Ebix’s biggest acquisition till date in India and was expected to create India’s largest and most profitable travel services company.

The board of directors of both the company had approved the deal. Given the fact that Ebix, led by 51-year old Kashmiri Robin Raina, is a supplier of on-demand software and e-commerce services, the deal was supposed to be a strategic fit for both companies, with Ebix’s expertise in the business-to-business segment.

The failed merger is not only a lesson for mergers in the travel industry but also for other industries as the economic slowdown will continue for a longer time and the operating conditions will be tough post-Covid. Those companies who are in merger talks will have to go back to the drawing boards and negotiate keeping all conditions in mind and make the deal a success.

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M & A Critique