Minority shareholders are poised to benefit from ITC’s demerger of its hotel business into a separate entity, ITC Hotels, potentially unlocking value and improving the FMCG giant’s return ratios, according to reports from four proxy advisory firms. The reports from InGovern Research Services, ISS, SES, and others come ahead of ITC’s shareholder meeting on June 6 to consider and approve the demerger proposal.
Proxy advisory firm ISS notes that the demerger could unlock value for shareholders and enhance ITC’s return ratios. The new structure will allow ITC Hotels to operate with an optimal capital structure, enabling it to access capital for growth. “It can attract investors, strategic partners, and collaborations whose investment strategies align with the hospitality industry,” ISS stated.
In August of last year, ITC’s board approved the demerger. ITC shareholders will receive one share in the soon-to-be-listed hotel entity for every ten shares they hold.
InGovern highlighted that ITC shareholders will gain a direct stake in a publicly traded hotel entity focused solely on the hotel business, aligning with ITC’s strategy to foster multiple growth drivers and protect against potential hostile takeovers. “Given the clean swap of shares, which benefits minority shareholders and promotes growth for both companies, we recommend shareholders vote for this scheme of arrangement,” InGovern advised.
SES views ITC’s decision to retain a 40 percent stake as strategic, providing stability and allowing fair price discovery, which is in the interest of shareholders. SES did not identify any major concerns regarding the proposed demerger.
Glass Lewis also recommended the demerger scheme. However, Institutional Investor Advisory Services (IiAS) advised ITC shareholders to vote against the demerger, arguing it does not fully unlock value for shareholders.