After W L Ross’ investment in SpiceJet, another major private equity deal is likely in the debt-ridden Kingfisher Airlines. Private equity majors interested in buyouts have started initial discussions with promoter Vijay Mallya. According to sources in the know, PE buyout majors such as TPG, Cerberus Capital and Blackstone have shown interest.
The talks are in early stages. Blackstone was likely to rope in a British airline for acquiring the Kingfisher stake, the sources said. The percentage of stake dilution in Kingfisher is not known.
Cerberus had acquired 3i Infotech’s US-based billing and payment unit for $137 million last year. In 2004, it had acquired a large stake in bankrupt Air Canada. TPG is already engaged in talks with AMR, the bankrupt parent of American Airlines, to buy a majority stake.
A Kingfisher Airlines spokesperson said, “We are in discussions with potential investors.” Currently, the promoter and promoter group hold 50.51 per cent in the airline. TPG and Blackstone spokespersons declined to comment. An email to Cerberus Capital remained unanswered.
Cerberus, named after the three-headed hound in Greek mythology that guards the gates of hell, is one of the largest of distressed asset buyers. It acquired the Air Canada stake in 2004 and also owns a stake in the Netherlands-based AerCap Aviation, a leading aircraft-leasing company. Cerberus had acquired 51 per cent stake in GMAC, the financing arm of General Motors, in 2004 for $7.4 billion.
Sushi Shyamal, partner, Ernst & Young Transaction Advisory Services, said, “Buyout funds may look at investing in Kingfisher Airlines if they have the flexibility to bring in new management. Typically, such funds want to take control of the firm and any buyout fund may not back the current management or may impose several conditions before investing.” In 2008, WL Ross, a turnaround player, had subscribed to convertible bonds worth $80 million in SpiceJet. It exited the airline in 2010.
Mallya is also in talks with foreign airlines such as Etihad and British Airways to sell a stake once the government allows foreign airlines to invest in Indian carriers. CEO Sanjay Aggarwal has reportedly said the promoters would be in a comfortable position even if 49 per cent holding was offloaded.
Kingfisher stocks went down 4.16 per cent on Monday to close at Rs 23.05 on the Bombay Stock Exchange.