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Agenda

         1   KingFisher Airlines
         2   Air Deccan
         3
             What kicked the deal?
         4   The rationale
         5
             Deal in detail ahead and replace it
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         6   The financial analysis
         7   Constraints and Issues
         8   The Market reactions
1
    KingFisher Airlines



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Kingfisher Airlines

 • Kingfisher Airlines is a private airline based in
   Bangalore, India. Currently, it holds the status of India's
   largest domestic airline, providing world-class facilities
   to its customers.
 • Owned by Vijay Mallya of United Beverages Group,
   Kingfisher Airlines started its operations on May 9, 2005
 • With a fleet of 4 brand new Airbus - A320, a flight from
   Mumbai to Delhi to start with. The airline currently
   operates on domestic as well as international routes,
   covering a number of major cities, both in and outside
   India.
Kingfisher Airlines

 • Kingfisher Airlines proved to be a stiff competition for
   other domestic airlines of India, with its brand new
   aircraft, stylish red interiors, stylishly dressed cabin
   crew and ground staff.
 • The airline introduced in-flight entertainment (IFE)
   systems, for the first time to Indian consumers. The IFE
   systems were provided on every seat, even on the
   domestic flights.
 • However, it faced a worsening economic scenario in
   2008.
2
    Air Deccan


    This is an example text. Go ahead and replace it
Air Deccan

• A wholly owned subsidiary of Deccan Aviation, Air
  Deccan, is India’s first low cost carrier.
• Deccan was known popularly as the common man's
  airlines. Continuing this trend even now, Simpli fly
  Deccan sold air tickets for as low as 500/-
• Deccan Aviation, promoted by Capt. G.R. Gopinath,
  Capt. K.J. Samuel and Capt. Vishnu Singh Rawal, was
  initially incorporated as a private limited company on
  June 15, 1995 in Karnataka with the main object of
  pursuing chartered aviation services.
• It was converted into a public limited company in 2005.
4    The Rationale
    This is an example text. Go ahead and replace it
•   To start overseas business
•   Expand the business and reduce the competition
•   Survive from the losses (577 Crore loss)
•   Competition from low-cost airlines
•   Market share
•   To make profits & overcome losses (418 Crore loss)
•   Competition
•   Unviable pricing
•   Ever Increasing Cost and cash crunch
Operational Synergies

 • Kingfisher and Air Deccan had exactly the same fleet of
   aircrafts which provides a huge opportunity on saving in
   engineering and maintenance cost.
 • The airlines will achieve perfect synergies in the while
   preserving the front-end and that will enable both
   Deccan and Kingfisher to be profitable.
 • Increasing market share(32-34%)
Infrastructure Synergies

 • Kingfisher and Air Deccan will now be able to access
   ground infrastructure at 65 airports, of which more than
   28 are common to both the set ups.
 • The new entity will have over 71 aircrafts.
Route Synergies

 • On the most lucrative of routes, New Delhi-Mumbai,
   that on its own accounts for more than half of India's 33
   million passenger traffic, the two carriers will now
   account for a total of 155 flights.
 • Have both direct and indirect connectivity to the US,
   Europe and different Asian regions
 • Received in writing slots to operate flights in San
   Francisco, JFK (New York) and Heathrow (London)
 • Also applied for Mumbai-Hong Kong, Mumbai-London
   and Delhi-Kathmandu routes.
Investment Synergies

 • Both airlines have orders for about 90 aircraft currently
   placed with European aircraft major, Airbus Industries.
 • Kingfisher has placed orders for new aircrafts at higher
   prices as compared to Air Deccan. The alliance with Air
   Deccan may provide it the opportunity to renegotiate
   its rates with the manufactures thereby saving
   substantially.
5   Deal in detail...
The deal…

 • On 1st June 2007, the Board of Air Deccan approved the
   allotment of equity share of 26% to UB group & its
   nominees. The shares were allotted at Rs.155 per share
   approximately a 10% premium for the current market
   price (CMP).
 • The UB group made the money in two phases: Rs.150
   Crore as initial investment & Rs396 Crore at the on or
   before the end of June.
The deal…

 • UB group had to make an open offer to acquire an
   additional 20% stake costing 418 Crores

 • Total deal size = 968 Crores for 46% stake

 • The UB group became the single largest share holder in
   the Deccan Aviation ltd.
The deal…

 • Kingfisher : Deccan Airlines shares swap ration 7: 3
 • Cash Paid = Rs.550Crs + 418Crs = Rs.968Crs
 • Present Value of 46% stake = 62316254.28* 67.25= 419
   Crores
 • Cost for kingfisher = Cash Paid - Present Value
                        = 968 – 419 = Rs. 549 Crores


 • Value Created/Destroyed (67.25/155) = – 43.38%
The deal advantages

 • The fresh equity capital will allow the Deccan to pay the
   loans & to fund various infrastructure projects.
 • Reduction of cost by sharing infrastructure
 • The merger ensures that Kingfisher does not need to
   invest more in infrastructure or in spare planes, thereby
   reducing costs and increasing profitability.
 • Access to International routes for Kingfisher
6   Financial analysis
Financial Analysis
7   Constraints
Constraints

 • The Ministry for Corporate Affairs (MCA) had issued a
   show-cause notice to the acquirer (UB Group) for non-
   compliance with the provisions of the Companies Act.
 • The Act prescribes that if post-acquisition the market
   share of the two entities combined exceeds 25 per cent
   the corporate concerned needs prior approval of the
   Union Government, The official said that the notice was
   issued by the southern region field office of the
   Ministry.
 • Different cultures
8   Market Reactions
Kingfisher deccan deal
Kingfisher deccan deal
Current Scenario

 • Market Share

 • Kingfisher airlines – Jet airways :- Strategic Alliance

 • SIPO’s & Rights Issue

 • Financial Report

 • Industry Making Losses-Oil Concerns
THANK YOU!
             Your Logo

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Kingfisher deccan deal

  • 1. Templates Your own sub headline This is an example text. Go ahead and replace it with your own text. Your own footer Your Logo
  • 2. Agenda 1 KingFisher Airlines 2 Air Deccan 3 What kicked the deal? 4 The rationale 5 Deal in detail ahead and replace it This is an example text. Go 6 The financial analysis 7 Constraints and Issues 8 The Market reactions
  • 3. 1 KingFisher Airlines This is an example text. Go ahead and replace it
  • 4. Kingfisher Airlines • Kingfisher Airlines is a private airline based in Bangalore, India. Currently, it holds the status of India's largest domestic airline, providing world-class facilities to its customers. • Owned by Vijay Mallya of United Beverages Group, Kingfisher Airlines started its operations on May 9, 2005 • With a fleet of 4 brand new Airbus - A320, a flight from Mumbai to Delhi to start with. The airline currently operates on domestic as well as international routes, covering a number of major cities, both in and outside India.
  • 5. Kingfisher Airlines • Kingfisher Airlines proved to be a stiff competition for other domestic airlines of India, with its brand new aircraft, stylish red interiors, stylishly dressed cabin crew and ground staff. • The airline introduced in-flight entertainment (IFE) systems, for the first time to Indian consumers. The IFE systems were provided on every seat, even on the domestic flights. • However, it faced a worsening economic scenario in 2008.
  • 6. 2 Air Deccan This is an example text. Go ahead and replace it
  • 7. Air Deccan • A wholly owned subsidiary of Deccan Aviation, Air Deccan, is India’s first low cost carrier. • Deccan was known popularly as the common man's airlines. Continuing this trend even now, Simpli fly Deccan sold air tickets for as low as 500/- • Deccan Aviation, promoted by Capt. G.R. Gopinath, Capt. K.J. Samuel and Capt. Vishnu Singh Rawal, was initially incorporated as a private limited company on June 15, 1995 in Karnataka with the main object of pursuing chartered aviation services. • It was converted into a public limited company in 2005.
  • 8. 4 The Rationale This is an example text. Go ahead and replace it
  • 9. To start overseas business • Expand the business and reduce the competition • Survive from the losses (577 Crore loss) • Competition from low-cost airlines • Market share
  • 10. To make profits & overcome losses (418 Crore loss) • Competition • Unviable pricing • Ever Increasing Cost and cash crunch
  • 11. Operational Synergies • Kingfisher and Air Deccan had exactly the same fleet of aircrafts which provides a huge opportunity on saving in engineering and maintenance cost. • The airlines will achieve perfect synergies in the while preserving the front-end and that will enable both Deccan and Kingfisher to be profitable. • Increasing market share(32-34%)
  • 12. Infrastructure Synergies • Kingfisher and Air Deccan will now be able to access ground infrastructure at 65 airports, of which more than 28 are common to both the set ups. • The new entity will have over 71 aircrafts.
  • 13. Route Synergies • On the most lucrative of routes, New Delhi-Mumbai, that on its own accounts for more than half of India's 33 million passenger traffic, the two carriers will now account for a total of 155 flights. • Have both direct and indirect connectivity to the US, Europe and different Asian regions • Received in writing slots to operate flights in San Francisco, JFK (New York) and Heathrow (London) • Also applied for Mumbai-Hong Kong, Mumbai-London and Delhi-Kathmandu routes.
  • 14. Investment Synergies • Both airlines have orders for about 90 aircraft currently placed with European aircraft major, Airbus Industries. • Kingfisher has placed orders for new aircrafts at higher prices as compared to Air Deccan. The alliance with Air Deccan may provide it the opportunity to renegotiate its rates with the manufactures thereby saving substantially.
  • 15. 5 Deal in detail...
  • 16. The deal… • On 1st June 2007, the Board of Air Deccan approved the allotment of equity share of 26% to UB group & its nominees. The shares were allotted at Rs.155 per share approximately a 10% premium for the current market price (CMP). • The UB group made the money in two phases: Rs.150 Crore as initial investment & Rs396 Crore at the on or before the end of June.
  • 17. The deal… • UB group had to make an open offer to acquire an additional 20% stake costing 418 Crores • Total deal size = 968 Crores for 46% stake • The UB group became the single largest share holder in the Deccan Aviation ltd.
  • 18. The deal… • Kingfisher : Deccan Airlines shares swap ration 7: 3 • Cash Paid = Rs.550Crs + 418Crs = Rs.968Crs • Present Value of 46% stake = 62316254.28* 67.25= 419 Crores • Cost for kingfisher = Cash Paid - Present Value = 968 – 419 = Rs. 549 Crores • Value Created/Destroyed (67.25/155) = – 43.38%
  • 19. The deal advantages • The fresh equity capital will allow the Deccan to pay the loans & to fund various infrastructure projects. • Reduction of cost by sharing infrastructure • The merger ensures that Kingfisher does not need to invest more in infrastructure or in spare planes, thereby reducing costs and increasing profitability. • Access to International routes for Kingfisher
  • 20. 6 Financial analysis
  • 22. 7 Constraints
  • 23. Constraints • The Ministry for Corporate Affairs (MCA) had issued a show-cause notice to the acquirer (UB Group) for non- compliance with the provisions of the Companies Act. • The Act prescribes that if post-acquisition the market share of the two entities combined exceeds 25 per cent the corporate concerned needs prior approval of the Union Government, The official said that the notice was issued by the southern region field office of the Ministry. • Different cultures
  • 24. 8 Market Reactions
  • 27. Current Scenario • Market Share • Kingfisher airlines – Jet airways :- Strategic Alliance • SIPO’s & Rights Issue • Financial Report • Industry Making Losses-Oil Concerns
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