Nearly one year after it was first announced, the merger deal between one of India’s biggest online travel agency (OTA) Yatra and Atlanta-based software and e-commerce firm Ebix has fallen apart.
In July 2019 Ebix announced it would acquire Yatra for $337.8 million. The plan called for Yatra to continue to operate as its own brand within the travel portfolio of EbixCash, a financial exchange that Ebix operates in India and that includes travel brands Via and Mercury.
The spat between the two companies has now intensified with Ebix threatening a counter-suit over the Gurugram-based Yatra’s legal move to terminate its pending merger agreement.
Atlanta, US-based Ebix said it disagrees with online travel agency Yatra’s legal complaint against it, and said it was “currently considering all options, including a counter-suit against Yatra.”
Yatra, India’s second-largest travel agency, said it was going to terminate its pending merger agreement with Ebix, and had filed a case in the State of Delaware, US against the US firm for breach of agreement.
Industry watchers said this is bad news for future deals in the sector, which has been hit badly by the Covid-19 pandemic.
Yatra shares dropped 20.33 per cent to $1.195 on Nasdaq on Monday while Ebix jumped 9.29 per cent to $31.005 a share. In its complaint, Yatra holds Ebix accountable for breaches of representations, warranties and covenants in the merger agreement and an ancillary extension agreement and seeks substantial damages.
“The sector is going through tough times as it is. It looks like one of the parties has developed cold feet. In such deals, involving different geographies, people will now come up with a defined timelines for the completion of such deals, with ensuing legal consequences,” said Arun Kejriwal, director and founder of Kejriwal Research and Investment Services.
“There might also be a non-refundable upfront payment once due diligence is completed. People will not let a deal remain open for long,” said Kejriwal.
Legal experts said this spelt bad news for the upcoming deals in this sector, and the timing of the fallout was worrisome.
“It is definitely not good news for the Indian merger market, which is already at an eight-year low. If the same has happened due to the Covid-19 situation, then we might be looking at another case of material adverse change,” said Ankita Singh, founding partner at AAS Regina Legal.
“Considering that Yatra has made Ebix’s conduct a ground for the termination, we might be looking at some internal dispute. Though we need to wait for further details, if our concerns are right, then we are set see major ambiguity in the market as we anticipate more merger deals to happen in the near future,” Singh said.
As detailed in the Yatra complaint, Ebix’s conduct breached material terms of the agreements and frustrated Yatra’s ability to close the transaction and obtain the benefit of the bargain for Yatra’s stockholders, the Indian travel agency said in a release.
Had the deal gone through, it would have marked Ebix’s biggest acquisition in India. Ebix entered India with the purchase of an 80 per cent stake in ItzCash for Rs 800 crore from Essel Group and other shareholders in May 2017.
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