— PHOTO: G. R. N. SOMASHEKAR

SHARING BEST PRACTICES: Capt. Gopinath, Chairman and Managing Director, Air Deccan, at a press conference in Bangalore on Thursday.

BANGALORE: Deccan Aviation, which operates the low-cost carrier Air Deccan, on Thursday chose United Breweries (Holdings) Ltd., promoted by liquor baron Vijay Mallya, to invest up to 26 per cent by issuing 3.52 crore preferential shares at Rs. 155 a share, valued at Rs. 550 crore.

UB Holdings, the investments arm of the UB group, is expected to make an open offer next Monday, according to SEBI guidelines. With this investment, Mr Mallya will become the single largest shareholder in Air Deccan, according to UB sources.

G. R. Gopinath, Managing Director of Deccan Aviation, said, the preferential allotment was much higher than the listed price of the shares.

After a board meeting at Air Deccan's headquarters here, Capt. Gopinath told media that UB Holdings had already paid an advance of Rs. 150 crore and would pay the balance within four weeks.

UB Holdings, with its Kingfisher Airline, had been the natural ally for Air Deccan, he said, adding that both airlines would complement each other. He said, "Keeping in mind various options we had, we felt that in the long term vision of our company, the association with UB Holdings will make enormous financial and operational sense where each other's best practices could be shared.''

Capt. Gopinath said Air Deccan would continue to remain as an independent entity and pursue the low-cost model, honing the business model to perfection. While he would be the Executive Chairman of Deccan Aviation, Mr. Mallya would be the Vice Chairman. Both would appoint six directors each besides having six independent directors on the board, while the board would appoint the Chief Executive Officer. Air Deccan's Chief Financial Officer Ramki Sundaram would be the acting CEO, Capt. Gopinath said.

He said, "UB is preferred over other interested investors due to the inherent synergies existing in Air Deccan and the UB-owned Kingfisher Airlines... With commonality of fleet, we foresee sharing of infrastructure, resources and best practices between both airlines. "

Capt. Gopinath said, "When Mr. Mallya approached me with the proposal, I mistook him and had thought that he wanted to acquire Deccan Aviation and make Air Deccan a full-service carrier. However, the situation became clear when Mr. Mallya said he will invest only as an investor.''

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