WL Ross pitches merger with SpiceJet to rival airlines

Mumbai: New York-based private equity fund WL Ross and Co. Llc., which in August agreed to invest $80 million (about Rs370 crore at the current exchange rate) in low-fare airline SpiceJet Ltd, has, on its own, started talks with Jet Airways India Ltd and Kingfisher Airlines Ltd for a possible merger with the Delhi-based carrier.
Ross, part of investment management firm Invesco Ltd, has also started discussions with other low-fare carriers for a possible merger in an attempt to create a larger airline, said a person familiar with the development.
“The idea is to increase the valuation of SpiceJet or the money invested by WL Ross before the firm exits,” this person added, asking not to be named. WL Ross has also suggested strict cost controls and tighter management to turn around SpiceJet, he added.
Ross is known for buying distressed assets and exiting after ensuring a turnaround and corporate restructuring. In the case of SpiceJet, analysts said it was not immediately clear if the firm wanted to exit the investment by selling its stake to another airline or by brokering a merger for a better valuation.
A senior executive with the UB Group, which owns Kingfisher Airlines, India’s second largest private carrier by passengers, confirmed the Ross approach and would only say: “The talks are at a very preliminary stage.”
Ross had agreed to invest in SpiceJet in two tranches, by buying out its foreign currency convertible bonds from Goldman Sachs Group Inc. of the US and Istithmar PJSC, an investment house based in the United Arab Emirates. The private equity fund also managed to get Goldman to invest $20 million in SpiceJet.
19/09/08 P.R. Sanjai/Livemint

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Categories: Foreign Sep 2008, Jet Airways Sep 2008, Kingfisher Sep 2008, New Sep 2008, SpiceJet Sep 2008