Lemon Tree Hotels shares surge over 4% as Warburg Pincus buys stake in its subsidiary Fleur Hotels

Shares of Lemon Tree Hotels rose as much as 4.11% to hit an intraday high of ₹155.99 on the National Stock Exchange on Monday, January 12 after the company informed exchanges that American private equity firm Warburg Pincus will be investing in its subsidiary Fleur Hotels.

Lemon Tree Hotels on Saturday said its board has approved Warburg Pincus' acquisition of 41.09% stake of APG Strategic Real Estate Pool NV in its subsidiary Fleur Hotels and an investment of ₹960 crore in tranches.

The acquisition will be done by Coastal Cedar Investment BV, an affiliate of Warburg Pincus. Lemon Tree Hotels board has approved the execution of a share purchase agreement enabling the acquisition by Coastal Cedar, a regulatory filing said.

The company's board has also approved execution of an agreement providing for a primary investment of up to Rs 960 crore by Warburg Pincus in tranches, to support the future growth of Fleur, which will be listed separately on the exchanges.

In a regulatory filing, Lemon Tree said the strategic reorganization and investment from Warburg in Fleur will unlock long-term shareholder value by creating two focused, high-growth, and large-scale platforms.

The proposed reorganization will create two clearly differentiated and complementary platforms: Lemon Tree Hotels Limited, as a pure-play, asset-light hotel management and brand platform; and Fleur Hotels Limited, as a large-scale growth-oriented hotel ownership platform with development capabilities and an attractive pipeline.

The respective boards of Lemon Tree and Fleur approved a composite scheme of arrangement designed to simplify the group structure, enhance strategic focus, and unlock long-term value for shareholders, it said.

The scheme is subject to regulatory and shareholder approvals.

This investment marks a renewed partnership between Warburg and Lemon Tree, following Warburg's earlier investment in the company in 2006, which supported the latter's initial growth.

"The scheme, to be implemented through an NCLT-approved process, will reorganise the group's asset ownership and operating structure. The 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," Lemon Tree stated.

Fleur will lead the group's all future hotel acquisitions and development, while Lemon Tree will transition to a fully asset-light model, focused on growing its hotel management, franchising and digital business, it added.

Fleur will become one of the largest owners of hospitality assets in India. Its owned portfolio will expand significantly, increasing from 3,993 keys and 24 operating hotels to 5,813 keys across 41 hotels. Fleur will continue to scale its owned portfolio through future development and acquisitions, the company added.

Lemon Tree Hotels Limited (LTHL) is one of India’s leading hospitality companies, catering to a wide range of customers – from value-conscious travellers to premium business and leisure seekers. With seven distinct brands – Aurika Hotels & Resorts, Lemon Tree Premier, Lemon Tree Hotels, Red Fox, Keys Prima, Keys Select, and Keys Lite – the group offers experiences across upper upscale, upscale, upper midscale, midscale, leisure, wildlife, and spiritual segments.

As of 12:16 pm, Lemon Tree Hotels shares traded 2.44% higher at ₹153, outperforming the NIFTY500 index which was down 0.32%.