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Why Yatra Online Stock Popped Monday

Rich Smith, The Motley Fool

What happened

Shares of Indian travel website Yatra Online (NASDAQ: YTRA) surged roughly 31% Monday after on-demand software company Ebix (NASDAQ: EBIX) -- which earlier this month reported strong sales growth but drastically reduced profits -- launched an effort to diversify its business by making an offer to buy Yatra.

Man pointing to a rising line on a chart.

Image source: Getty Images.

So what

As detailed in Ebix's press release, the would-be acquirer has offered to pay $7 per share to acquire 100% of Yatra's outstanding stock, an "84% premium to Yatra Online's closing share price of $3.80 as of March 8, 2019." Yatra would be required to pay off all of its outstanding debts prior to the acquisition, and to surrender, buy out, or retire any outstanding warrants to buy Yatra stock.

At its own discretion, Ebix would pay for the acquisition either in cash, or in its own shares.

Now what

Ebix is encouraging Yatra to agree to its buyout offer quickly by saying it will "reduce its offer at its discretion if it does not receive a positive engagement response from the Yatra Online Board in a timely manner or if any subsequent steps are taken by the Company that could have an adverse impact on its future value."

Ebix also said it reserved the right to withdraw its offer if Yatra did not give it permission by March 18 to begin pre-acquisition due diligence. We should know how this will play out, therefore, once that deadline arrives: 5 p.m. Eastern time on March 18.

Yatra issued a press release saying: "Consistent with its fiduciary duties, and in consultation with its independent legal and financial advisors, the Company's Board of Directors will review and consider the proposal to determine the course of action that it believes is in the best interest of the Company and all of its shareholders.  Company shareholders do not need to take any action at this time."

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of Yatra Online. The Motley Fool has a disclosure policy.