OYO Rooms dumps rival Zo after buyout promise, sparks retaliation

SoftBank-backed budget aggregator OYO Rooms said on Friday it has called off all discussions to acquire smaller rival ZO Rooms, two years after it first initiated talks.

The move by OYO prompted a legal threat from ZO, backed by US hedge fund Tiger Global, which says "Oyo is resailing from the contractual terms after acquiring the entire ZO Rooms business by March 2016. This is not an act of 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." 

In February 2016, SoftBank had confirmed OYO's acquisition of ZO. ZO, an aggregator of budget rooms, had shut its website.

"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," a spokesperson from OYO said.

ZO had raised $32 million from investors led by Tiger Global in August 2015. Since then, a meltdown in venture funding triggered a consolidation wave. 

The proposed all-stock deal for ZO would have fetched 4.5 per cent stake for Tiger Global and 2.5 per cent for ZO Rooms’ founders in OYO.

OYO has 70,000 rooms in 230 cities across India. The company earlier had mentioned adding 10,000 more rooms to its inventory. ZO's assets include a network of 11,000 rooms in 1,000 hotels across more than 50 cities and towns in India, which would have given OYO more muscle to fight Treebo Hotels and other larger online travel companies that have entered the hospitality business.

Last month, OYO raised $250 million in a funding round led by SoftBank, and is building a model of managing its own properties.