Shares of Lemon Tree Hotel Ltd stock rallied 4% on 12 January after the company revealed a business reorganisation strategy and a Warburg Pincus investment in its subsidiary, Fleur Hotels.

Lemon Tree Hotels has launched a corporate reorganisation strategy in which it will unlock value by separating into two distinct organisations. According to the agreement, Lemon Tree Hotels will operate as a pure-play asset-light company focused on hotel management, brand and loyalty, and distribution services, the firm said in an exchange filing on Saturday. 

Warburg Pincus will acquire APG’s share in Fleur Hotels and invest up to Rs 960 crore to support expansion. Fleur Hotels will now operate as a hotel owning and leasing company.
 
This will be accomplished by the exchange of hotel assets and development capacities for stock.

Aside from that, Lemon Tree Hotels plans to merge two of its wholly owned subsidiaries, Carnation Hotels and Hamstede Living, into itself, according to an exchange filing. The remaining four wholly-owned subsidiaries of Lemon Tree Hotels will be amalgamated into Fleur Hotels by the issuance of Lemon Tree Hotels shares.

Following the corporate restructure, Lemon Tree Hotels’ shareholding structure will stay unaltered. Meanwhile, Fleur Hotels will experience a substantial change in ownership. 
 
Lemon Tree Hotels will control 41.03% of Fleur Hotels following the corporate restructure, while Warburg Pincus will own 26.01%, according to the exchange filing. 
 
Prior to the transaction, Warburg Pincus will buy APG Strategic Real Estate Pool N.V.’s 41.09% share in Fleur Hotels.

According to the exchange filing, this is the hotel management company’s second strategic cooperation with Warburg Pincus since 2006. 
 
Following the restructure, Fleur Hotels will trade as a distinct corporation on the exchanges. The scheme of arrangement is subject to regulatory and shareholder approval, Lemon Tree Hotels stated in the exchange statement.

At 3:30 pm, the shares of Lemon Tree Hotels closed 1.74% higher at Rs 152.43 on NSE.

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