Indian media baron Kalanithi Maran has made an open offer to shareholders of SpiceJet Ltd. to raise his stake in the budget airline to a controlling 57.73%, manager to the offer Enam Securities Pvt. Ltd. said Monday.
Mr. Maran–founder of Sun TV Network Ltd.–made the mandatory open offer for an up to 20% stake after agreeing to purchase 37.73% of SpiceJet, the nation's second-biggest low-fare airline by market share.
Maran's Kal Airways Pvt. Ltd. Saturday agreed to buy the 37.73% stake, totaling 156.5 million shares, from SpiceJet founding firm Royal Holdings Services Ltd., affiliates of U.S. billionaire Wilbur L. Ross and India Asset Recovery Fund Ltd. at 47.25 rupees apiece for a total of 7.39 billion rupees ($158.2 million).
Mr. Maran's Sun TV owns more than 20 television channels and 42 radio stations in south India.
Under the open offer, Mr. Maran is seeking to buy up to about 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.
SpiceJet shares, which opened lower Monday, gained as much as 6% to touch 59.55 rupees on news of the open offer. They later shed initial gains and were trading down 2.2% at 54.75 rupees as of 0725 GMT. That compares with a 1.1% rise on the Bombay Stock Exchange's benchmark Sensex.
Under Indian regulations, it is mandatory for a buyer acquiring 15% or more in a company to make an open offer for 20% more in the target. SpiceJet's open offer begins Aug. 6 and closes Aug. 25.
The Wilbur L. Ross affiliates–WLR Recovery III (India) Ltd., WLR Recovery IV/ESC (India) Ltd., WLR/GS (India) Ltd.–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 affiliate firms might convert the remaining bonds into shares during the open offer period, said Sharan Lillaney, an analyst with Mumbai-based brokerage Angel Broking Ltd.
“Ross will sell equity shares of SpiceJet to Maran as and when these bonds are converted,” Mr. Lillaney said.
The deal values Ross' stake in SpiceJet at 5.93 billion rupees ($127 million).
Ross had along with Goldman Sachs Group Inc. invested $100 million in SpiceJet in the second half of 2008, in a bid to turnaround the loss-making airline. 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,” Mr. Lillaney said, referring to Kalanithi Maran's purchase of SpiceJet stake. “It will give a lot of clarity to the airline for raising funds.”
SpiceJet is one of the few Indian low-cost carriers to turn to profit for the fiscal year ended March 31 after the Indian aviation industry took a hit due to 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 INR614.5 million for the last fiscal year on revenue of 21.81 billion rupees.
SpiceJet, which plans to start overseas operations from July, recently received board approval to raise $75 million through a sale of shares. The funds will be used for its international expansion.
Source: WSJ