Submitted by : Nikhil Patni

Final Merger Deal Final Merger Deal Final Merger Deal Final Merger Deal

Contents
‡Overview Of Aviation Industry ‡About Kingfisher ‡About Air Deccan ‡Methods Adopting ‡Mission & Vision ‡SWOT Analysis ‡Reasons behind the Merger ‡The Merger Kingfisher & Air Deccan Merger (Pictorial View) ‡About The Deal ‡Terms Of The Deal Synergies From Merger Financial Perspective Cost ± Benefit Analysis Stock Market Reaction HR Perspective Systems Perspective Kingfisher & Air Deccan Merger Advantage The Aftermath ± Post Merger Issues Conclusion

Contents ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Overview Of Aviation Industry About Kingfisher About Air Deccan Methods Adopting Mission & Vision SWOT Analysis Reasons behind the Merger The Merger Kingfisher & Air Deccan Merger (Pictorial View) About The Deal Terms Of The Deal Synergies From Merger Financial Perspective Cost Benefit Analysis Stock Market Reaction HR Perspective Systems Perspective Kingfisher & Air Deccan Merger Advantage The Aftermath Post Merger Issues Conclusion .

Overview of aviation Industry in India Market share pre merger Jet airways Jet lite 17% 11% 0% 25% Air deccan spice jet 8% 4% 1% 11% 9% 14% Paramount airways indigo airlines Go air .

Vijay Mallya 2 years ago Bangalore based company Started with a fleet of 4 Airbus A320 aircrafts Now has a brand new fleet of 8 Airbus A320 aircraft.About Kingfisher Airlines ‡ ‡ ‡ ‡ Launched by Dr. 3 Airbus A319-100 aircraft and 4 ATR72 aircrafts .

About Air Deccan ‡ Established in 2003 ‡ Is India s first low-cost airline ‡ Part of Deccan Aviation Private Limited. India's largest private heli-charter company .

Financial Sharing:.Before merger the UV group was having 46% of share in Deccan aviation but after the merger they are holding more than 51% of the stake in the company. which comes under the reverse merger .as they belong from the same field i. .e. 1.METHODS ADAPTING As we have taken the example of merger between between Kingfisher and Deccan airlines.. Airlines.

.Mission of Merger between KF AND DA  As the Indian market is growing day by day so providing them the best service is the main goal of the airlines industries. As the market is going competitive day by day so merger and acquisition is an important thing. For that the airline companies are either merging or acquiring the other small or the big airlines company for having higher impact on the market.

 To demystify air travel in India by providing reliable low cost and safe travel to the common man by constantly driving down the air fares. .

Vision of Merger between KF and DA.   . To become dominant low cost carrier in the country. (as the motive of the kingfisher was that only when they merged with the Deccan airlines.) To empower every Indian to Fly. as Deccan airlines were the low cost carrier in the country.  To become dominant carrier in the country.

‡ Scarce manpower can be optimally utilized. ground handling.SWOT Analysis Of The Deal ‡ The first obvious advantage that Kingfisher Airlines . ‡ Insurance premium and lease rentals can be re-negotiated.Air Deccan have is commonality of fleet . infrastructure like engineering. . training can be combined.

‡ Changes already have begun to surface with a brand name change for Deccan being toyed by Kingfisher. ‡ Change in work culture and processes have begun to surface with a brand name change for Deccan being toyed by Kingfisher.‡ Current aviation policy wouldn't allow Kingfisher to begin flying overseas for another three years. . because of policy regulations.

Rationale Behind M&A ‡ From the Kingfisher s Point of view .For the expansion purpose .To start overseas business(May 2005) .Survive from the losses (577 Crore loss) ‡ From the Air Deccan s Point .To make the profit & overcome losses (418 Crore loss) .

The Merger ´Kingfisher Airlines recently acquiring 46 per cent in Deccan Aviation through a two step processµ ‡ Kingfisher Airlines acquired 26 per cent in Deccan Aviation and then made a public open offer for shareholders of Deccan Aviation ‡ He then upped the ante by buying an additional 20 percent through an open offer for Rs. 5.7 billion .

Kingfisher Air Deccan merger Rs 550 CR Kingfisher 7 Air Deccan : 3 26% stack .

155/share     .he paid an additional Rs 418 Cr for a further 20% stake through an open offer. Subsequently.115 Cr when Mallya acquired 26% Market Share of Air Deccan:18 % Fleet with Air Deccan:4 Combined market share: 29%.Share bought at 2007 was RS.About The Deal  Vijay Mallya paid Rs 550 Cr to acquire 26% equity in Deccan. Enterprise value: Rs 2.

‡ The m The deal was closed through allotment of 3. 2008. ‡ Merger was based on recommendations of Accenture. the global consulting firm. to UB. valued at Rs 155 a share. . ‡ They started operating as a single entity by April.52 crore fully paid-up equity shares. They started operating as a single entity by April. KPMG did the valuation and the swap ratio was decided accordingly. 2008.20 on NSE.Terms of the Deal ‡ The new shares were issued at a premium of Rs 8.80 or 6 % over Air Deccan s closing price of Rs 146.

of which more than 28 are common to both. etc.) ‡ This provides a huge opportunity on saving in engineering and maintenance cost. . This will have air travel for all fares and all kinds of people. (cost cutting upto 300 cr) Infrastructure synergy ‡ Kingfisher and Air Deccan are now using 65 airports. ‡ Synergy benefits arising from a common fleet of aircraft. ‡ Offer the maximum number of 537 daily flights in 69 cities. brakes . ‡ The new entity will have over 71 aircrafts (41 Airbus aircrafts and 30 ATR aircrafts).SYNERGIES FROM MERGER Operation synergy ‡ Kingfisher and Air Deccan have exactly the same fleet of aircrafts & the same equipment's (engines.

Investment synergy ‡ Fleet expansion can be optimized to increase Available Seat per kilometer (ASKs) as they will have more option to choose aircraft for short and long haul operation accordingly. ‡ Sharing of physical resources both on ground and in air could potentially spread fixed cost over a larger base and hence lower unit cost Route synergy ‡ Increase their passenger load factor ‡ Both the companies can rework on route and network strategies formation so that both the airlines benefit together as they have same flights between two destination. .

Financial Perspective ‡ Kingfisher Airlines acquired 46 per cent in Deccan Aviation through a two step process: ± Kingfisher Airlines acquired 26 per cent for Rs. 550 crore in Deccan Aviation ± Then. it made a public open offer for shareholders of Deccan Aviation ‡ UB Holdings collectively spent around Rs 1.000 crore for this acquisition .

85 =Rs.968Crs ‡ Present Value of 46%stake = 62316254.85Crs ‡ Cost for kingfisher = Cash Paid-Present Value ‡ ‡ = 968-856.111.COST BENEFIT ANALYSIS ‡ Cash Paid = Rs.15Crs. .28*137.550Crs + 418Crs = Rs.5 = 856.

a day after Vijay Mallya announced his plan to merge Kingfisher into Deccan. .61 points. ‡ Shares of Deccan Aviation fell in Mumbai as investors turned skittish on news of a merger between the low-cost carrier and billionaire Vijay Mallya s full service Kingfisher Airlines. even as the BSE Sensex gained 70. the budget carrier's stock fell more than six per cent to Rs 277.Stock Market Reaction ‡ Strangely.

.HR Perspective ‡ Kingfisher airlines ± a first class management team not just at top most level but also in the second line ± Have managed better than its competition in terms of its HR policies during recession ± benching some 50 pilots and not sack them as an austerity measure inspite of losses ± signed a non-poaching alliance with Air Deccan(before the acquisition) under which both the airlines agreed not to hire each other s employee ± flight attendants selected through a national level model contest which stressed the fact that its employees had to be capable enough to meet the airlines high service standards.

Systems Perspective    Deccan s Raddix was replaced with Sabre s Reservation System Integration of booking engine of Deccan with universal ARMS April 2009 Kingfisher Airlines become first airline from India to embrace social media May 2009 Launch of King Mobile a mobile ticketing solution August 2009 Long term service agreement with Honeywell to reduce operating costs All these steps were taken to reduce operational and transactional costs with the entry into the low cost carrier segment    .

.Kingfisher & Air Deccan. thereby reducing costs and increasing profitability. ‡ Reduction of cost by sharing infrastructure ‡ The merger ensures that Kingfisher does not need to invest more in infrastructure or in spare planes. ‡ The combined share of the two carriers will increase the Market share. ‡ As per the existing laws Kingfisher Airlines would not be able to operate on international routes until 2010. However Air Deccan would be eligible from the second half of next year as its five-year ceiling is coming to an end.Merger Advantage ‡ The fresh equity capital will allow the Deccan to pay the loans & to fund various infrastructure projects.

The Aftermath ² Post Merger Issues ‡ Different Cultures ‡ Expected Job Cuts ‡ Different Leadership Styles .

‡ Expected Industry impact Further consolidation Rise in fares Greater shareholder value Higher attrition rates in employees .contd...

Motivation for Merger ‡ Ever Increasing Cost ‡ Compromise on quality hits the brand ‡ Unviable pricing ‡ Competition ‡ Increasing costs ‡ Difficulty in maintaining brand image ‡ Competition from low-cost airlines ‡ Competition from International Airlines .

Conclusion The Industry has Witnessed tremendous growth in the Past Decade Leading to intense Competition in the Industry & Setting the Stage for Consolidation . .

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