Lemon Tree Hotels announced on Saturday, 10 January, that its board has approved a significant corporate restructuring involving Warburg Pincus's strategic investment in its subsidiary Fleur Hotels. The transaction includes both a stake acquisition and substantial primary investment to fuel future growth.

Investment Structure and Stake Acquisition

The board approved Warburg Pincus's acquisition of APG Strategic Real Estate Pool NV's entire 41.09% shareholding in Fleur Hotels through its affiliate Coastal Cedar Investments BV. Additionally, Warburg Pincus will make a primary investment of up to ₹960.00 crore in stages to fund the company's future growth initiatives.

Corporate Restructuring Plan

The proposed reorganisation will establish two distinct and complementary platforms. Lemon Tree Hotels Limited will focus solely on hotel management and branding with an asset-light model, while Fleur Hotels Limited will operate as a large-scale, growth-focused hotel ownership platform with development expertise and a strong pipeline.

The scheme, to be implemented through an NCLT-approved process, will reorganise the group's asset ownership and operating structure. Hotel assets currently owned by Lemon Tree will be transferred to Fleur, which will serve as the group's exclusive asset ownership and development company.

Asset Transfer and Portfolio Expansion

Under the restructuring plan, Lemon Tree will merge two wholly owned subsidiaries, Carnation Hotels and Hamstede Living, with itself. Four other wholly owned subsidiaries will be merged into Fleur:

• Oriole Dr Fresh
• Sukhsagar Complexes
• Manakin Resorts
• Canary Hotels

Additionally, 12 hotels from Lemon Tree (11 operational hotels and one under-construction hotel in Shimla), along with investment in one under-construction hotel in Shillong, will be demerged with Fleur.

Leadership and Future Operations

Patanjali Govind Keswani, Founder of Lemon Tree Hotels, will serve as Executive Chairman of Fleur Hotels and will eventually transition to a Non-Executive role at Lemon Tree. "This scheme is intended to create a simplified, transparent, and growth-oriented structure for both companies, which we believe will enhance long-term value for our shareholders," Keswani stated.

Anish Saraf, Managing Director at Warburg Pincus, commented: "Lemon Tree has played a pioneering role in shaping India's mid-market hospitality segment, building a large scale, high-quality portfolio with strong brands and operating capabilities. With favourable industry fundamentals and a clear strategic roadmap, we look forward to supporting the team as they continue to scale the business."

Timeline and Regulatory Approvals

Fleur's shares will be listed on NSE and BSE, with the entire listing process expected to be completed within 12 to 15 months. The scheme is subject to regulatory and shareholder approvals. Following the proposed transaction, Fleur will become one of the largest owners of hospitality assets in India.

Lemon Tree will continue operating its leased hotels in Indore and Aurangabad, which are nearing the end of their lease periods. The company will also manage 1,820 keys across 17 hotels transferred to Fleur, alongside its existing portfolio managed through the restructured arrangement.

Source: https://www.livemint.com/companies/news/warburg-pincus-to-invest-rs-960-crore-in-lemon-trees-fleur-hotels-11768042719978.html

Lemon Tree Hotels has announced a significant strategic restructuring with private equity major Warburg Pincus set to acquire a 41.09% stake in its subsidiary Fleur Hotels through a ₹960 crore investment in tranches. The board approved transaction marks a major transformation for the hospitality group, creating two distinct business platforms.

Strategic Acquisition Details

The stake acquisition will be executed by Coastal Cedar Investment BV, an affiliate of Warburg Pincus, which will purchase the holding from APG Strategic Real Estate Pool NV. The transaction structure involves a phased investment approach, with the ₹960 crore being deployed in tranches to support the subsidiary's growth plans.

Business Reorganisation Strategy

The board has approved a comprehensive strategic reorganisation that will fundamentally reshape the company's structure. Under this plan, Fleur Hotels will be listed separately as an independent entity, while Lemon Tree transforms into a pure-play, asset-light hotel management and brand platform. This restructuring aims to create two focused, high-growth, and large-scale platforms that can unlock long-term shareholder value.

Fleur will assume the role of the group's exclusive hotel asset ownership and development company, taking responsibility for all future hotel acquisitions and development activities. The reorganisation will be implemented through a composite scheme of arrangement, requiring regulatory and shareholder approvals through an NCLT-approved process.

Portfolio Expansion and Asset Transfer

The restructuring will significantly expand Fleur's hospitality portfolio through strategic asset transfers and consolidations. As part of the reorganisation, Lemon Tree will merge two wholly owned subsidiaries—Carnation Hotels and Hamstede Living—into itself, while four other subsidiaries will be merged into Fleur.

Additionally, 12 hotels will be demerged into Fleur, including one under construction in Shimla and an investment in a hotel project in Shillong. This expansion will position Fleur as one of India's largest owners of hospitality assets.

Leadership and Future Operations

Founder Patanjali Govind Keswani will serve as Executive Chairman of Fleur Hotels and will eventually transition to a non-executive role at Lemon Tree. Keswani emphasized that the scheme is designed to create a simplified, transparent, and growth-oriented structure for both companies, enhancing long-term value for shareholders.

Anish Saraf, Managing Director at Warburg Pincus, highlighted Lemon Tree's pioneering role in shaping India's mid-market hospitality segment, noting the company's large-scale, high-quality portfolio with strong brands and operating capabilities. The investment reflects confidence in favorable industry fundamentals and the company's strategic roadmap.

Timeline and Operational Continuity

The listing of Fleur Hotels on the NSE and BSE is expected to be completed within 12 to 15 months, subject to regulatory approvals. Following the transaction, Lemon Tree will continue operating its existing leased hotels in Indore and Aurangabad, which are approaching the end of their respective lease terms. The company will also manage an additional 1,820 keys and 17 hotels transferred to Fleur, alongside its existing managed portfolio.

This strategic transformation positions both entities for focused growth, with Fleur concentrating on asset ownership and development while Lemon Tree leverages its management expertise and brand strength in an asset-light model.

Source: https://www.moneycontrol.com/news/business/companies/warburg-pincus-to-invest-rs-960-crore-in-lemon-tree-hotels-arm-fleur-take-41-stake-13766660.html