JM FIN ARC conduct in Leela saga questionable

New Delhi, April 25 (IANS) With SEBI stopping the Hotel Leelaventure takeover bid in its tracks, several questions have cropped up. A combination of two minority investors -- ITC and LIC -- jointly owning a tad over 10 per cent petitioned both NCLT and SEBI to prevent this takeover from going ahead, citing oppression and mismanagement against the company. IANS now learns that a Middle Eastern billionaire along with an Indian arms dealer had jointly bid for Leelaventure company and their bid at $600 million was higher than any other bid.

Further, they had offered to pay every cent of the outstanding loans for the entire company, including the Mumbai Leela property (which is under legal dispute with AAI).

The Leela saga has seen many twists and turns and the flawed takeover is now under the microscope.

It is believed JM Financial excluded this bid deliberately on purpose by asking them to deposit $90 million in Earnest Money Deposit (Rs 630 crore) with JMF, whereas they did not ask for a single penny from Brookfield.

The Middle Eastern businessman and the arms dealer had several rounds of meetings with the Nair brothers -- Vivek and Dinesh -- in January second week, however, JMF did not budge from their position.

Moreover, a reputed Thai hotel chain, Minor Hotels, also bid for Leela Group and they too were asked to deposit 15 per cent of the bid value, as JMF wanted to block them from entering the fray against BF (Brookfield).

JM Financial, which has been pushing this deal is equally under the cosh for pushing this flawed acquisition. The fact that Brookfield was made to pay Rs 150 crore each to the Nair brothers for branding and Intellectual Property Rights is another facet of this deal which is seriously questionable. JM FIN ARC conduct is now being examined by the SEBI.

ITC has also separately moved the National Company Law Tribunal (NLCT) along with two applicants, asking for an urgent hearing and also waiver of 10 per cent shareholding as minimum threshold to have a say in the management decisions.

ITC has alleged that minority shareholder rights are being suppressed. NCLT will hear the matter on June 18.

The ITC which owns 7.92 per cent has alleged that the Leela-Brookfield deal violated provisions of related-party transactions. LIC's (with 2.36 per cent) objections have not been ascertained immediately.

The company's board had sought shareholders' approval through a postal ballot on April 24, for the sale of its assets to Brookfield for Rs 3,950 crore.

The assets include hotel properties in Delhi, Bengaluru, Udaipur and Chennai. SEBI's letter to Leela hotels was issued on the basis of complaints filed by two minority shareholders -- tobacco major ITC Ltd and Life Insurance Corporation of India (LIC).

Promoters own 47.3 per cent while JM FIN ARC has 26 per cent. "While Sebi is examining the representations in view of paucity of time and interest of investors in securities, you are advised that none of the transactions proposed in the PBN (post ballot notice) of March 18, are acted upon till further directions from Sebi," the market regulator said in its letter to Hotel Leela.