May 31: Vijay Mallya, an unabashed lover of life’s luxuries, today picked up a 26 per cent stake in Air Deccan, once described as the “Udupi hotel of India’s airline business” by its founder, Captain G.R. Gopinath.
Mallya, who had plonked down £595 million for Scotch whisky maker Whyte & Mackay just three weeks ago, will pay Rs 550 crore to become the largest shareholder at Rs 155 a share, a Rs 9 premium on the market price, in India’s first low-cost carrier.
A no-frills airline doesn’t really cut the mustard with the flamboyant image of Mallya, known for his thoroughbreds and yacht — and he has said some pretty rude things in the past about the concept and its practitioners in India, including Air Deccan.
But he had to swallow all of that and sweet-talk Gopinath into letting him come aboard and turn away the four other bidders in the fray.
Gopinath told reporters at a televised news conference in Bangalore that he had at first rejected Mallya’s offer because it had come from Kingfisher, the full-service airline. “Nowhere in the world has a low-cost carrier been taken over by a premium-service airline.”
The Air Deccan boss, who remains executive chairman, said he agreed to the marriage with the bejewelled Mallya on the understanding that the liquor lord wouldn’t tamper with his low-cost model. Mallya had said he was changing his offer and was keen to come in as an individual investor.
Gopinath laboured this point at the news conference to emphasise that there would be no dilution of the Air Deccan philosophy that has made it the second largest private airline in the country with a market share of 22 per cent to Kingfisher’s 11 per cent.
The Kingfisher-Air Deccan combine will be the largest airline in the country with 71 planes and a market share of over 33 per cent. The two airlines will retain their “separate identities for the time being but with a commonality of management resources”, said Mallya’s UB group president Ravi Nedungadi.
Mallya was said to be away in Paris and not available for comment. He will speak in Mumbai tomorrow and perhaps give an insight into how he wrapped up a deal he has secretly pursued for the past six months even as rival Naresh Goyal’s Jet Airways huffed and puffed over the Air Sahara acquisition.
Mallya has already paid Air Deccan Rs 150 crore and will pay the rest in the next four weeks. The Kingfisher honcho, who refers to his passengers as “guests in his home”, will now be nominated as the vice-chairman of Air Deccan.
United Breweries Holdings Ltd, his group company, will now make an open offer to acquire a further 20 per cent of Air Deccan’s equity at Rs 155 per share. If the open offer succeeds, he will control around 46 per cent of the carrier.
Anil Ambani’s ADAG Group, which was one of the bidders for the airline, is reported to have offered Rs 135 per share. Gopinath said the Kingfisher bid was the best not only on the table but also in the long-term interests of all the stakeholders, customers and the airline business. “This deal will avoid a bloodbath in the skies that might have otherwise ensued,” he added.
The bloodbath in Air Deccan itself was worth Rs 212 crore in losses in the quarter ended March 31, 2007.