Kalanithi's Rs 700-cr offer not too hot for SpiceJet owners

Kalanithi's Rs 700-cr offer not too hot for SpiceJet owners
MUMBAI: Kalanithi Maran, media baron and promoter of Sun TV, and the promoters of SpiceJet are sparring over the price being offered for a majority
stake in the budget carrier, with Mr Maran’s proposal of Rs 700 crore for a 51% stake finding few takers among the airline’s shareholders. Mr Maran, whose interests have now spread from media to aviation, has completed due diligence and is believed to have made an offer of Rs 700 crore, or Rs 55 per share. This is not acceptable to the SpiceJet shareholders, as the offer is at a discount to the ruling market price of the stock. The SpiceJet stock fell marginally to Rs 57.55 on Monday. At current market price, SpiceJet is valued at about Rs 1,388 crore. “There are differences on the valuation. If that is over, a deal may be announced in a fortnight,” said an investment banker requesting anonymity. Kenya-based Kansagra family is the promoter of SpiceJet with a 13% stake. SpiceJet director Ajay Singh holds 5%. The deal, if it goes through, will be a combination of share sale by existing shareholders and issue of new shares to Mr Maran, who has been looking for an opportunity to enter the aviation industry. He held discussions to buy Star Aviation, an yet-to-be-launched regional airline in South India. Attempts to reach Mr Maran and Sanjay Aggarwal, SpiceJet’s chief executive officer, failed. SpiceJet’s chief operating officer Samyukta Sridharan, in response to an ET query, said, “As a policy, we do not comment on market rumours and speculation.” Financial services group Religare is also in the race, but yet to do the due diligence, said a person having direct knowledge of the development. The Anil Ambani Group had showed some initial interest. Advisory firm Ernst & Young (E&Y) is doing the financial due diligence for SpiceJet and law firm Amarchand & Mangaldas & Suresh A Shroff & Co is advising Mr Maran on legal issues. Financial services firm Edelweiss is advising SpiceJet on the deal. Key executives within the airline said the Maran group had done initial reference check on the SpiceJet management some time ago. Aviation analysts and experts, who have been tracking SpiceJet, said valuations for the airline can be the deal breaker. “SpiceJet is one of the most expensive airlines in the country,” said a source from one of the major advisory firms in the country, not wanting to be identified. “If one compares on the basis of number of aircraft, Kingfisher Airlines with 65 aircraft has a market cap of Rs 1,286 crore whereas SpiceJet with only 20 aircraft has a market cap of Rs 1,390 crore,” he said. The stock has seen as much as 60% rise over the past six months, compared to peers like Jet Airways, which saw an increase of 42% over the same period. US-based billionaire private equity investor Wilbur Ross has also invested in the airline and is believed to looking to sell his stake. Mr Ross invested $80 million in SpiceJet in July 2008 through foreign currency convertible bonds. In December this year, Mr Ross will either have to convert or redeem the bonds. Mr Ross’ stake will go up to 31% if he converts the bonds, forcing him to launch the mandatory 20% open offer, which, he does not want to, sources said. “This is why Wilbur Ross is looking to sell his stake in the company,” said the person having direct knowledge of the matter. Wilbur Ross could not be contacted for comment.