MakeMyTrip to issue $960m worth shares to acquire Ibibo group

According to the recent filing made by Nasdaq-listed firm, MakeMyTrip will be issuing shares worth around $960 million for the acquisition of rival portal ibibo Group.

Ibibo Group Holding will also be cutting off its 14% stake in Naspers' payments business PayU and 52% in business-tobusiness (B2B) online travel company Tek Travels before the transaction ends, with MakeMyTrip entitled to a payout on these assets in five years.

Ibibo group is mostly owned by South African media and internet giant Naspers (nearly 90%), with the remaining held by Chinese internet giant Tencent and management.

These shareholders will be given 38.97 million shares, or a 40% stake, of MakeMyTrip as a part of the all-stock deal with Naspers cornering a third of the combined entity.

The combined entity is expected to be valued over $2.2 billion. MakeMyTrip has already called in a meeting for approval of the transaction from its shareholders.

In the quarters ending June and September 2016, MakeMyTrip continued the pace discounts and marketing expenditure spending a combined $100 million before announcing the deal to acquire ibibo.

But MakeMyTrip does not see this spending coming down, as it looks to increase penetration of online hotel booking increasing from 12-15% right now to 35-40% in the next two-three years, CEO Rajesh Magow told ET in October.

The acquisition will be adding more cash to MakeMyTrip's balance sheet, as ibibo shareholders Naspers and Tencent are expected to "contribute proportionate working capital upon the closing of the transaction., MakeMyTrip had cash of $167.2 million at the end of September.