Mergers & Acquisitions

Marriage of

Presented by,

Priyanka Suryavanshi 118

Nivedita Phalke 103

Dipali Wadhavane 93

Akshta Tandel 91

Kavita Gadge 102

Group no.12

AGENDA• AVIATION INDUSTRY.• INTRODUCTION TO KINGFISHER AIRLINES.• INTRODUCTION TO AIR DECCAN AIRLINES.• MOTIVES BEHIND MERGER• FINAL MERGER DEAL• SYNERGY• MARKET SCENARIO• POST MERGER ISSUES• CURRENT SCENARIO

AVIATION INDUSTRY

INTRODUCTION

• Private sector players being allowed to operate as air taxi operators in India.

• A number of private players commenced domestic operations like Damania, East-West, Modiluft, and NEPC, entered the industry.

• However, a decade later none of them have survived.

Entry Of

Private Players

• 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

Contd…..• 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.

• 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 both for commercial and non commercial purposes in India and to provide all aviation related services.

• It was converted into a public limited company in 2005.

Cotnd……

• A wholly owned subsidiary of Deccan Aviation, AirDeccan, 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/-• The main object is pursuing chartered aviation

services.• It was converted into a public limited company in

2005.

Contd…..

• Deccan Aviation is the largest private sector helicopter charter company in India.

• It has a fleet of 12 helicopters and small aircraft deployed in 8 bases across India.

• These bases are at Bangalore, Mumbai, Delhi, Ranchi, Hyderabad, Surat, Katra and Colombo

MOTIVES BEHIND MERGER

• Competition from low-cost airlines.

• To start business overseas.

• To increase market share.

MOTIVES BEHIND MERGER

• To overcome losses (418 Crore)

• Compromise on quality hits the brand

FINAL MERGER DEAL

On 19thdec.2007 ,it was announced that kingfisher airline will merge with air Deccan.

DEAL STRUCTURE• 1st Phase:

- UB bought 26% stake at Rs.155 p.s. on 9th July,2007

- Paid Rs.550crores• 2nd Phase:- Open offer for additional 20% stake- Additional Rs.418crores- Total deal size = 968 Crores for 46% stake

OPERATIONAL SYNERGIES

• Operational Synergy in the form of cost cutting(upto Rs.300crs.):

Kingfisher and Air Deccan had exactly the same fleet of aircrafts which provides a huge opportunity on saving in engineering and maintenance cost.

• With a fleet strength of 72 planes, the combined entity with a 33% market share, becomes the second biggest domestic aviation group (after Jet-Sahara) in the country.

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.

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.

Changes in Stock Prices

The Aftermath – Post Merger Issues

• Different cultures• Expected job cuts• Different leadership

styles• Rise in fares• Expected industry

impact• Greater shareholder

value

CURRENT SCENARIO

•

Market share-33%

SKYTRAX award

Kingfisher red

Financial report-total revenue is Rs 1911 crore which is 15% improvement