The Securities Appellate Tribunal (SAT) on Thursday dismissed an appeal by ITC Ltd challenging the sale of Hotel Leelaventure Ltd’s assets to Brookfield Asset Management Inc, bringing the Canadian alternative asset manager a step closer to acquiring four luxury Leela hotels.
The sale, worth more half a billion dollars, was approved by Leela’s board in March but was put on hold following directions by the Securities and Exchange Board of India (Sebi) based on complaints by ITC and Life Insurance Corp. of India (LIC).
Hotel Leelaventure on Thursday posted on BSE the voting results of a postal ballot in the asset sale. The majority of the shareholders (89.12%) voted in favour of the deal, the results showed.
Sebi told Hotel Leelaventure in July to conduct a fresh shareholder vote seeking approval for the sale of the assets to Brookfield. Accordingly, the hospitality company issued fresh postal ballot notices to its shareholders on 13 August. It planned to declare the results on 18 September but did so on Thursday.
The markets regulator had also allowed JM Financial Asset Reconstruction Co. Ltd, which owns a 26% stake in Leela, to vote on the deal.
ITC, which holds 7.92% in Hotel Leelaventure, had moved SAT challenging the market regulator’s order, rejecting its argument that the sale of assets to Brookfield should not be allowed because of related-party transactions.
The deal hit a roadblock after Hotel Leelaventure’s minority stakeholders, ITC and LIC, approached Sebi alleging that JM Financial ARC was a related party and could not vote on the board’s resolution approving the deal.
In an oral order on Thursday SAT rejected ITC Ltd’s plea. The Economic Times reported online that ITC is seeking to challenge the SAT ruling in the Supreme Court.
“This (order) means that the deal will be closed soon. There’s nothing much to be done now. This was the only thing holding up the deal. The deck has been cleared,” said a person who is closely involved with the deal, requesting anonymity.
Email queries to an ITC spokesperson remained unanswered till press time. A spokesperson for Brookfield declined to comment on the tribunal’s order and the proposed transaction.
The hotel chain was earlier barred from declaring or acting upon the results as per an interim order passed by SAT on 13 September.
In March, Hotel Leelaventure had said that it was selling four hotel properties and a land parcel to Brookfield for ₹3,950 crore, making it the largest ever hotel deal by value in India. The deal was finalized after more than a year of talks between Brookfield and stakeholders of debt-laden Hotel Leelaventure, which has been in the middle of a financial restructuring.
The luxury hotel chain owns five hotels, comprising more than 1,400 rooms, across New Delhi, Bengaluru, Chennai, Mumbai and Udaipur. The deal excludes the hotel in Mumbai, but involves a land parcel in Agra.
As part of the proposed deal, Brookfield will buy the Leela brand, existing and all upcoming management contracts of Hotel Leelaventure and also absorb the employees of the four hotels.
The hotel company, set up by C.P. Krishnan Nair in 1986, had been looking to pare debt by selling its hotels, as well as some of its non-core assets, including land. The company had an outstanding debt of around ₹3,799 crore as of 31 March 2018.
The article was first reported on Livemint.com