Finally, suspense on the much-speculated acquisition of Zo Rooms by Oyo has come to an end. The deal had fallen apart after two years hiatus, according to a statement by the Softbank-funded company. Oyo had started the talks to acquire rival Zo Rooms in 2015.
Later in 2016, media reports confirmed the acquisition after Softbank mentioned Zo Rooms acquisition by its portfolio company in its annual filing in December 2015.
Multiple media reports in February 2016 mentioned that following the acquisition, Zo Rooms would get a 7% stake in the combined entity. Talks between Oyo and Zo Rooms started a few months after SoftBank invested in the Gurugram-based company.
ZO Rooms was founded by the founders of backpacker hostel chain Zostel in mid-2015. “In late-2015, Oyo explored a potential acquisition of Zo Rooms. The non-binding term sheet for this deal already stands terminated in September 2016. Following this, we tried to identify potential value in their business but could not reach an outcome. We can now confirm that Oyo has ended all discussions on the matter,” Oyo said in a statement.
While it’s not clear why Oyo decided not to acquire Zo Rooms, both companies embroiled in a legal tussle. Oyo had alleged that executives of Zo Rooms had stolen its data and produced evidence such as emails and CCTV footage.
Later, Delhi High Court had issued a stay order against Zostel barring it from using any confidential information. Zo Rooms had raised about $47 million from blue-chip investors including Tiger Global and Orios Ventures across two rounds.
“As a matter of clarification, Zo states that OYO is resiling from the contractual terms after acquiring the entire ZO Rooms business by March 2016. This is not an act in good faith and Zo takes a very serious view of the matter and will take all steps to protect its interests and enforce its rights,” the Zo Rooms spokesperson said through a statement.
Founded in 2013 by Ritesh Agarwal, Oyo claims to operate 8,500 hotels and 70,000 rooms in more than 230 cities in India. It had secured around Rs 1600 crore ($250 mn) from SoftBank and Hero Enterprise in September this year followed by a $10 million strategic investment from multi-billion dollar hotel management firm China Lodging.