India Inc. at Digital Inspiration

Kingfisher on course to dominate Indian aviation space by buying SpiceJet

Posted: 04 Jul 2008 10:32 PM CDT

Vijay Mallya is probably beginning another round of consolidation in Indian skies by buying out a controlling stake in low cost carrier SpiceJet through a combined cash and share swap deal.

Kingfisher may buy out the stakes held by Gulf-based fund Istithmar and UK-based Kansagra family, who together hold 26.33% and make a mandatory open offer for further 20% stake.

For this 26% stake, Mallya may have to spend around Rs.150 crore thus valuing SpiceJet at Rs.600 crores. The deal will give Vijaya Mallya a 40% marketshare outbidding Jet which has a 33% share.

Another funding option being worked out is that SpiceJet merges with Kingfisher with a share swap ratio of 1:3.

SpiceJet makes a good fit for Kingfisher as it is operationally well run and has a fleet of Boeing aircrafts unlike Kingfisher and Deccan which have Airbus. This would give Kingfisher a fill up as it then comes in league of AI and Jet to have both types of fleet and also can then operate its international flights on Boeing planes.

If the deal happens, Mallya is expected to fly Deccan on regional routes while use SpiceJet as a low cost airline running on metro routes. Kingisher would continue to run under its exclusive premium tag.

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