Online travel portals MakeMyTrip and ibibo announce merger

PUNE, India - Oct. 19, 2016 - PRLog -- MakeMyTrip and Ibibo have agreed to merge in a stock transaction, representing the coming together of India's largest travel booking portals and presaging what many believe is an impending consolidation in the country's consumer internet sector.

Although neither company would indicate the value of the combined entity, people familiar with the transaction estimated it at about $1.8-$2 billion. Another indication of the valuation came from a statement by Makemytrip, which pegged the stake owned by Ctrip at 10%--the Chinese firm had invested $180 million earlier this year.

Shares of the loss-making Makemytrip, which is listed on Nasdaq, soared nearly 46% to $29.75 at 9 pm.

"Today's announcement is a significant step forward for the rapidly growing travel industry in India," MakeMyTrip Group CEO Deep Kalra said in a statement.

Once the transaction closes the brands are expected to retain their entity. "There are three well-established brands, each a leader in their space that we value. These include MakeMyTrip, GoIbibo and RedBus and on the internet, it is very important that you keep brands that add value and grow them and we are quite clear we would want to play to the advantage of each of these brands. If you look around the world, you will see keeping established brands have helped," says Kalra.

South Africa's Naspers and Tencent, which own Ibibo, will become the largest shareholders in the combined entity with a 40% stake. Naspers owns 91% of the holding company which controls Ibibo and Tencent the rest.

Morgan Stanley and Goldman Sachs acted as the exclusive financial advisors to MakeMyTrip and Ibibo Group, respectively.

Ibibo's brands include goibibo for hotels and air ticketing and redBus, the bus booking portal. MakeMyTrip controls an estimated 30% share of the market for online booking of hotels and flights. Ibibo's controls about one-fifth of the hotel booking.

"Naspers and Tencent are selling ibibo Group to Makemytrip in exchange for an issuance of new shares by Makemytrip. Upon closing of the transaction, MakeMyTrip will own 100% of ibibo Group," the statement said.

Kalra will remain as group chief executive and executive chairman of Makemytrip, and co-founder Rajesh Magow will continue to remain CEO for India. Ibibo Group Founder and CEO Ashish Kashyap will join Makemytrip as a co-founder and president of the organization.

"India today is the next big internet market. We should see more similar consolidation across various online sectors to claim the top spot in their categories," said Vijay Shekhar Sharma, CEO of mobile wallet and online marketplace Paytm, which also operates a travel marketplace. "They (Makemytrip) are the numero uno, and this acquisition makes them the leader by many miles."

The acquisition comes a little over three months after rival Yatra agreed to be acquired by Nasdaq-listed special purpose acquisition firm Terrapin 3 Acquisition Corp in a reverse merger deal, with an enterprise value of $218 million. It also comes eight months after Naspers invested $250 million in Gurgaon-headquartered Ibibo Group.

The other significant players in the online travel space include Cleartrip, Booking.com, and Expedia.

With about a 35% stake in Makemytrip, the South African media and internet conglomerate will tighten its grip over the Indian market as it already owns online classifieds portal Olx, a 15% stake in India's largest online retailer and most valued internet company Flipkart, and a payments business PayU, which acquired Citrus Pay for $130 million earlier this year. Obvious synergies exist between MakeMyTrip and the payments business for processing of transactions.

Naspers has been one of the earliest investors in the Indian internet market and is known for making an early bet on Chinese internet major Tencent, which owns messaging application Wechat. Naspers owns a 34% stake in Tencent, which became the most valued company in Asia last month when its market capitalization went past $250 billion.

At the end of March 2016, the major shareholders in Makemytrip were SAIF Partners (14.1%), T Rowe Price, Deep Kalra and Wasatch Advisors (about 10% each) and Ctrip (16.6%). The $180 million invested by Ctrip via 5-year convertible notes will be converted into equity.

For the first quarter of fiscal 2017, MakeMyTrip reported a net loss of $14.31 million, or 34 cents a share, up from net loss of $6.94 million, or 16 cents a share in the year-ago period. In fiscal 2016, MakeMyTrip made a loss of $88.5 million on revenue of $336 million. Hotels and packages, the mostly hotly contested category for travel booking portals, accounted for revenue of over $250 million.

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