New Delhi: Shareholders of Kingfisher Airlines Ltd, which is privately held by Vijay Mallya’s United Breweries Group, will receive three shares of Deccan Aviation Ltd for every seven Kingfisher shares they now hold, in a move that completes the merger of the two carriers and according to latest public filings hands over at least two-thirds control in the merged entity to the liquor baron.
The merger process is expected to be completed by 1 April, subject to regulatory approvals. As a result, Mallya, who already owns 49.77% of Deccan Aviation through his UB Group’s Kingfisher Radio Ltd and UB Overseas Ltd, will effectively control more than 68% of the company, which with the addition of Kingfisher’s fleet will have 78 aircraft, making it India’s largest private airline by fleet size. Executives of Kingfisher Airlines and Deccan did not answer phone calls for comment.
The UB Group owned 201.56 million shares in Kingfisher Airlines, a wholly-owned unit, according to United Breweries’s annual report for fiscal 2007. Deccan’s outstanding shares count to nearly 135.8 million.
“For Deccan shareholders, it’s a relatively good valuation, because it doesn’t dilute their shareholding in the new company considerably,” said an analyst at a European brokerage, who is not allowed to be cited by name in press reports. “But for somebody like (G.R.) Gopinath, who until now had a sizeable stake, (he) will be reduced to just about an executive officer.” Deccan chairman Gopinath’s holding will drop to 5.2% from 8.5%.
Kingfisher Airlines will retain the ground-handling and training units, while Deccan Aviation will consider the sale of its relatively tiny charter aviation business to Gopinath, the company said in an emailed statement.
Deccan Aviation, meanwhile, posted losses of Rs190.8 crore in the December quarter, up 97% from the comparable quarter the year before. The airline attributed its third highest quarterly loss ever to one-time costs in an ongoing rebranding and a re-alignment of the airline from a low-cost carrier to what it calls a “high value carrier.”
Deccan Aviation has never declared an operating profit but said in the statement, which did not include an audited balance sheet, that it had managed to operate profitably at the earnings before interest, taxes, depreciation and rent level.