Kingfisher Airlines, Deccan to merge

Kingfisher Airlines, Deccan to merge
Sify.Com

Bangalore: Low-cost carrier Deccan and Vijay Mallya-led Kingfisher Airlines on Wednesday decided to merge and create a single corporate entity to cut down operational costs and accelerate their journey to profitability. The Boards of the two private airlines at a joint meeting unanimously decided after management consulting firm Accenture in its report recommended their merger for greater operational and marketing synergies.
Details of Deccan-Kingfisher merger, valuations and swap ratio will be worked out by accountancy firm KPMG.

For more news, analysis click here>>

Liquor barron Mallya's UB Group had earlier this year acquired 46 per cent stake in Deccan Aviation Ltd, becoming its single largest shareholder. Air Deccan will continue to be listed incorporating the businesses of both Kingfisher Airlines and Deccan itself but the listed entity's name will be changed to Kingfisher Airlines," UB Group Chairman Vijay Mallya said on Wednesday night. He said details of the merger, valuations and swap ratio would be done by KPMG, while Dalal & Shah were appointed to "very quickly" come up with valuations and recommend merger structure.

The listed entity (which would be Kingfisher) would offer low fare service under the Deccan brand and premium services under Kingfisher brand. "Hopefully, at the start of next year (April 2008), we should have one listed entity." Mallya said the charter business of Kingfisher and Deccan would be independent in a separate entity.

Mallya would be the chairman and CEO of the merged entity, while executive chairman of Deccan, Captain G R Gopinath would be the vice-chairman. UB Holdings held a 46 per cent stake in Deccan prior to the merger decision, and Mallya said the merged entity would be majority-owned by UB Holdings. Gopinath said Accenture was commissioned to come up with a comprehensive report on what needs to be done to get the operational and marketing synergies, bring down the cost of two airlines and give strategic and tactical inputs.

Mallya said the report highlighted how the two airlines can save a lot of money, bring down the cost of operation and accelerate the route to profitability by merging into a single entity.
"It (Deccan and Kingfisher) will be one company, and eligible to fly (internationally) in 2008," Mallya said. He said one of the key elements of the Accenture report is route rationalisation between the two airlines. "It's not going to one (airline) at the cost of another," he said.

--------------------------------------------
Kingfisher, Deccan agree to talk merger
The Economic Times

BANGALORE: The consolidation momentum in the Indian aviation sector has started rolling again with Deccan Aviation and Kingfisher deciding on an “in-principle” merger talks. This decision has wide ranging ramifications not just for the airlines but also for the entire industry. The move ends a long speculation of a possible merger after UB emerged as the single largest shareholder in Deccan Aviation. UB Holdings, the parent of Kingfisher, which holds 46% stake in Deccan Aviation, might float a new company to operate the merged entity. Emerging from the Deccan Aviation AGM here on Wednesday, UB Group chairman Vijay Mallya said there was “in-principle” agreement on the merger.

He was hopeful of pushing the matter through at the ensuing Deccan Aviation board meeting. It is learnt that Accenture, which was roped to suggest ways of maximising synergies between the carriers, also suggested a merger. The merged entity is likely to see the Mallya-led UB Holdings having a clear majority interest with the absolute quantum to be decided on swap ratio. Though the caveat being that both Deccan Aviation and Kingfisher would operate as separate brands in the skies. Captain Gopinath very categorically remarked that there would not be a single airline brand as both had different value proposition. UB Group CFO Ravi Nedungadi hinted at the possibility of a reverse merger for taking the listed Deccan into the privately-held Kingfisher.
“There is a possibility of forming a separate entity under UB Holdings to manage the merged operations...UB group has enough experience in handling merger situations”. Mr Nedungadi said the combined entity will have accumulated losses of around Rs 2,000 crore, with Kingfisher and Deccan contributing Rs 1,200 crore and Rs 800 crore, respectively.

“Losses of airlines are available for future set-offs against profits,” he added, while claiming that both airlines were expected to break even next financial year. The modalities of the merger are likely to be worked out by a financial consultant to be appointed by the two carriers. The merged entity will have an operating fleet of 75 aircraft with a marketshare of around 30%, placing it ahead of Jet-Jetlite combine and Indian. The merger could also smoothen the process for Kingfisher to start its international operations to the US and the UK by mid next year, as Deccan Aviation would complete five years of service, complying with the regulatory requirement. The Deccan Aviation scrip closed the day at Rs 295.45 on NSE, showing a fall of 6.44% while UB Holdings gained 1.4% to close at Rs 1,084 on the BSE.


Source: http://www.theeconomictimes.com and www.sify.com . We thank (will be grateful to) the owners of the above articles/sites/sources/Govts for allowing/referring this. We are just providing the link/information of business updates from the leading sources for the benefit of readers. Viewers are strictly advised to take own decision in Stock buying and make verification about the information. Blog is not responsible for any faulty information.