IMD-3-1977 © 2008
Leleux, Benoit F.; Pigeaux, Isabelle
On 31 May 2007, after a week of intense discussions, the board of Deccan Aviation Ltd approved the acquisition of 26% of its equity by Kingfisher Airlines’ parent company, United Breweries (UB) Holdings Ltd at a price representing about a 10% premium to the prevailing market price of Deccan Aviation Ltd. UB Group also got the option to bid for another 20% of the company at a later period at the same cost of Rs 155 per share, in conformity with SEBI regulations. UB Group became the largest investor in Deccan Aviation Ltd, entitled to nominate three directors on the board. On the 12-strong board, the original supporters also nominated 3 members and the remaining 6 and institutional investors were independent managers nominated jointly by the other two groups. Commenting upon this groundbreaking transaction, Capt. Gopinath said: “Initially, when Dr. Vijay Mallya (UB Group owner) openly said that he was interested in Air Deccan, I didn't take it seriously.
I thought he wanted to buy the entire airline, and we were not for sale. But when all the available synergies between Kingfisher and Air Deccan were analyzed more carefully, it became clear that coming would make tremendous functional and financial sense. Besides, UB were happy with a lower shareholding that I originally perceived to be a minimum of 51%. They've exhibited their commitment to manipulating the enormous synergies that exist between Kingfisher and Air Deccan with UB now set to eventually become the biggest single shareholder. Both airlines will run as a group whilst maintaining their individual identities for the forseeable future. I believe that Dr. Mallya and myself can do amazing things together and build tremendous shareholder value with our specific teams”. Learning objectives: Learn about new business models, innovations, growth management, low cost carrier strategies, issues that are Indian.
Subjects: Low cost carrier; India; Growth management; Entrepreneurship
Settings: India ; Airline ; 80 aircrafts; 2,000 employees ; 2007-2008
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