According to recent news reports from Reuters MakeMyTrip Ltd which happens to be India’s oldest travel website operator will buy its rival company ibibo. This buyout will create the largest player in this fast growing market of flight, hotel, and bus bookings in the country.
According to a source of Reuters which is familiar with the deal all-stock deal values the combined company at $1.5 billion.
This deal will put the well known online websites such as goibibo.com and redbus.com into MakeMyTrip’s portfolio. MakeMyTrip also happens to own its flagship brand and alternate accommodations site Rightstay.
The majority stakeholder of ibibo is a South African based company Naspers Ltd. The company owns 91 percent stake of ibibo. China’s Tencent Holdings Ltd has got the rest 9% stake in the company. According to a source of Reuters, the combined stake of these two companies from South Africa and China amounts to $600 million.
As of Monday’s close, the market capitalization of MakeMyTrip happens to be about $861.3 million.
MakeMyTrip has come under stiff competition in its hotel bookings business from companies like Cox & Kings Ltd, Thomas Cook (India) Ltd, and newcomers like OYO Rooms.
According to reports in the least seven quarters this online travel agency missed its profits estimates. This missing of estimates was attributed to higher marketing costs. On the other hand, according to Thomson Reuters I/B/E/S MakeMyTrip is expected to suffer a loss of 63 cents and revenue of $50 million.
On Tuesday MakeMyTrip in a press release said that its takeover of ibibo would help the company “unlock meaningful synergies”. However, the online travel agency felt short of revealing any deal value of the deal to take over ibibo.
According to an analyst tracking the online travel market in India in terms of gross booking value, the online travel market in India is estimated to be about $10 billion.
On Tuesday the shares of MakeMyTrip rose to 56.4 percent. This is a two-year high for the company.
After MakeMyTrip takes over ibibo the combined company will have a market share of 20 percent of the Indian online air bookings. This was stated by MakeMyTrip on a call with analysts on Tuesday. According to MakeMyTrip the combined company’s market share in online hotel bookings and bus bookings will be much lower than the online air bookings segment and will be in single digits.
After India’s oldest travel website operator takes over ibibo Naspers and Tencent will have 40 stakes each in the company. Additional 10 percent stake will be of China’s biggest online travel service provider Ctrip.com International Ltd.
The deal of MakeMyTrip’s takeover of ibibo is expected to close by the end of December.