8 July 2019 Hospitality The LEMONTRE board has approved the acquisition of Keys Hotels, owned by Berggruen Hotels Pvt. Ltd, for a cash consideration of INR4,710m (enterprise value INR6,050m) through its subsidiary Fleur Hotels. The acquisition will increase LEMONTREs managed rooms by 50% and owned/leased rooms by 24%, taking the total to ~7,800 rooms, which constitutes 15% of the mid-market room supply in the country (up from 11%). Currently, occupancy/ARR of Keys Hotels is 10%/25% lower than LEMONTRE. Therefore, post-acquisition, the company would control a significant chunk of the supply in the respective micro-markets (Whitefield & Electronic City in Bangalore and Pune), which would further aid ARR increase. Common corporate expenses for Keys Hotels in FY19 stood at INR150m, which management intends to reduce to INR20m in FY21. Thus, on an overall basis, management estimates Keys Hotel to generate EBITDA of INR510-590m (base and target case) in FY21 v/s INR203m in FY19. Thus, based on managements estimates, acquisition cost stands at 11.9x-10.3x FY21 EV/EBITDA.