United Breweries (Holdings) Ltd., which runs Kingfisher Airlines, is to buy 26 percent of Deccan Aviation Ltd, which operates the low-cost carrier Air Deccan, for US$135 million. (6/1/2007)
Deccan will issue about 35 million shares at US$3.8 each to United Breweries (Holdings), an 18 percent premium to Deccan’s closing price on Wednesday. UB Group has paid an advance of US$36.82 million and the balance will be paid in next four months.
UB Holdings, with its Kingfisher Airline, had been the natural ally for Air Deccan, Capt. GR Gopinath, MD, Deccan Aviation said, adding that both airlines would complement each other.
He said, “Keeping in mind various options we had, we felt that in the long term vision of our company, the association with UB Holdings will make enormous financial and operational sense where each other’s best practices could be shared.”
Air Deccan would continue to remain as an independent entity and pursue the low-cost model.
While Capt. Gopinath would be the Executive Chairman of Deccan Aviation, Mr Mallya would be the Vice Chairman. Both would appoint six directors each besides having six independent directors on the board, while the board would appoint the Chief Executive Officer.
Air Deccan’s Chief Financial Officer Ramki Sundaram would be the acting CEO.
The combine will have a 71-strong fleet comprising Airbus A320 and ATR turboprops and fly to about 70 cities and towns across the country.
The deal signal further consolidation in the Indian aviation market as it follows the merger of state-run Air India and Indian Airlines, and Jet Airways Ltd’s acquisition of Air Sahara earlier this year.
On the move, Siddhanta Sharma, CEO of LCC SpiceJet, according to financially daily The Economic Times said, “It is better to have a well-funded competitor than a cash-strapped rival who is likely to make irrational moves.”