Mahindra buys Finnish company Holiday Club for Rs 600 crore

Mumbai: Mahindra Holidays and Resorts India, part of the $16.7-billion Mahindra Group, is acquiring Finland-based Holiday Club Resorts from a clutch of financial investors for 73-million euros (about Rs 600 crore), which will catapult the Indian firm into a global vacation ownership powerhouse.

This is Mahindra Holidays' fourth deal overseas, but unlike its earlier investments in standalone resorts in Dubai, Thailand and Indonesia, the transaction gives the 18-year-old company a significant global presence. To be completed by 2016, the Holiday Club deal, valued at five times its estimated operating profit of 14.2-million euros for the year ending September 2014, would elevate Mahindra Holidays to the No. 3 position in vacation ownership globally, after US' Wyndham and Marriott.

For the automobile-to-software Mahindra Group, acquisition of Europe's biggest time-share company is part of its larger vision to attain dominance in businesses the conglomerate is present in. "This acquisition provides Mahindra Holidays with a springboard for growth in Europe and other international destinations," said group chairman Anand Mahindra in a statement.

Holiday Club has 32 resorts with nearly 2,800 rooms in Finland, Sweden and Spain, with some having golf courses, spa hotels and 'Angry Birds' indoor theme parks. On the other hand, Mahindra Holidays has 41 resorts with 2,500 rooms in India and in some West Asian and South-East Asian countries.

This is the first time in the Indian hospitality sector history that a local firm is acquiring a global resorts chain. So far, Indian chains have acquired only standalone properties in various parts of the world.

Mahindra Holidays is raising debt at offshore financial hubs to fund the Holiday Club deal, which is structured in two stages. In the first step, it is acquiring 18.8% in the Finnish firm for 13-million euros, and in the next stage, it will acquire controlling ownership over a period of two years. "We have the right to acquire 100% of Holiday Club, but we want the current management to hold 10% of the company," Arun Nanda, chairman, Mahindra Holidays, which has a membership base of 1.71 lakh, told TOI. While Mahindra Holidays is debt-free, Holiday Club, which has 50,000 members, has a debt of about 50 million euros. Nanda explained Mahindra is resorting to offshore funding as the interest cost is less than the Holiday Club's dividend.

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