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open offer made to SpiceJet shareholders

Indian media baron seeks to acquire controlling stake in SpiceJet

Jun 14, 2010

NEW DELHI — Indian media baron Kalanithi Maran made an open offer to shareholders of SpiceJet Ltd. to raise his stake in the budget airline to a controlling 58%, according to the offer's manager, Enam Securities Pvt. Ltd.

Mr. Maran, founder of Sun TV Network Ltd., made the mandatory open offer for a stake of as much as 20% after agreeing to buy 38% of SpiceJet, India's second-biggest low-fare airline by market share after IndiGo, an unlisted carrier that is controlled by by Interglobe Aviation Pvt. Ltd. Mr. Maran's Sun TV owns more than 20 television channels and 42 radio stations in southern India.

Mr. Maran's Kal Airways Pvt. Ltd. on Saturday agreed to buy the 38% stake, totaling 156.5 million shares, for 7.39 billion rupees ($158 million) from a group that includes U.S. billionaire Wilbur L. Ross. The deal valued the airline at a total of $422 million and will leave Mr. Ross with a profit in an industry that is strongly competitive in India.

Under the open offer, Mr. Maran is seeking to buy as many as 83 million shares of SpiceJet at 57.76 rupees each, a 3% premium to the stock's Friday closing price of 56.05 rupees, Enam said in a newspaper advertisement Monday.

SpiceJet shares fell 1.6% to close at 55.15 rupees, compared with a 1.6% rise on the Bombay Stock Exchange's benchmark Sensitive Index. The shares had gained as much as 6% in earlier trading Monday amid news of the open offer.

Under Indian regulations, it is mandatory for a buyer acquiring 15% or more in a company to make an open offer for an additional 20% in the target. SpiceJet's open offer begins Aug. 6 and closes Aug. 25.

In addition to vehicles for Mr. Ross, the group that sold the 38% stake over the weekend includes SpiceJet founding company Royal Holdings Services Ltd. and India Asset Recovery Fund Ltd.

The Ross affiliates held bonds equivalent to about 125.4 million shares in SpiceJet and have so far converted bonds equivalent to about 83.2 million shares, Enam said. The deal values Mr. Ross's stake in SpiceJet at 5.93 billion rupees, or $126.8 million.

Mr. Ross had along with Goldman Sachs Group Inc. invested $100 million in SpiceJet in the second half of 2008, in a bid to turn around the unprofitable airline. Mr. Ross put in $80 million, buying overseas convertible bonds, while Goldman put in the remainder by subscribing to equity warrants of the airline.

"The deal shows that SpiceJet is doing very well," said Sharan Lillaney, an analyst with Mumbai-based brokerage Angel Broking Ltd. "It will give a lot of clarity to the airline for raising funds."

SpiceJet is one of the few low-cost Indian carriers that turned to profit for the fiscal year ended March 31, after the aviation industry took a hit amid the global economic slowdown in 2008 and early 2009. Indian carriers flew 89.36 million passengers last fiscal year, a 12% increase from the previous year.

The budget airline reported a net profit of 614.5 million rupees for the latest fiscal year on revenue of 21.81 billion rupees.

SpiceJet, which plans to start overseas operations in July, recently received board approval to raise $75 million through a sale of shares. The funds will be used for the airline's international expansion.

Indian media baron seeks to acquire controlling stake in SpiceJet
Kalanithi Maran / Image via


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