ITC, ITC Hotels plan mega merger

ITC Ltd, the cigarettes to paperboard and hotels major, today announced plans to amalgamate its 72 per cent subsidiary ITC Hotels Ltd as wel...

ITC Ltd, the cigarettes to paperboard and hotels major, today announced plans to amalgamate its 72 per cent subsidiary ITC Hotels Ltd as well as two other hotel businesses with itself.

The board of ITC will meet on August 25 to consider the amalgamation, among other things, the company said in a notice to the stock exchanges. The board will consider 8216;8216;amalgamation of the Company8217;s subsidiaries, ITC Hotels Limited, Ansal Hotels Limited and Bay Islands Hotels Limited wholly owned subsidiary of ITC Hotels Limited, with the company.8217;8217;

A similar notice was sent by ITC Hotels 8212; which operates Welcome group of hotels across the country 8212; to the stock exchanges. Till date, both tobacco and hotel divisions of ITC are owned by British tobacco giant BAT and Indian financial institutions.

Analysts say a merger between the two companies makes sense as ITC will be able to cut costs and increase profitability. Many of ITC Hotels employees at present are getting salaries from ITC.

It will be interesting to see what will happen to the stake of BAT which has been barred in the past by Indian FIs to raise stake in the company.

On Friday, ITC closed at Rs 1,018 while ITC Hotels closed at Rs 162.

ITC is performing extremely well on the bourses for the past one year with its share price flaring due to super profits its tobacco business is generating. The company is now getting into the FMCG business by selling greeting cards, apparels and even agarbattis.

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ITC Ltd, whose main business is tobacco and cigarettes, is also into FMCGs, paper and paperboard, agribusiness and hotels. It reported a profit after tax of Rs 1,593 crore on net sales of Rs 6,470 crore for 2003-04, against a net profit of Rs 1,371 crore on net sales of Rs 5,866 crore the previous year.

ITC Hotels reported a profit after tax of Rs 20 crore on net income of Rs 158 crore for 2003-04, against a net profit of Rs 57 lakh on revenues of Rs 121 crore the previous year.

Set up in 1975, ITC Hotels operates the Welcomgroup brand and is India8217;s third largest chain. It has four brands 8212; the prefix ITC for super deluxe category, WelcomHotel for five-star hotels, WelcomHeritage for palaces, forts and havelis and Fortune Hotels for four star hotels.

It has a marketing tie-up with Sheraton Corporation of the US for eight Welcomgroup properties.