Maran bid for SpiceJet control bogged down over price
01 April 2010
Talks between Sun TV promoter Kalanithi Maran and promoters of low-cost carrier SpiceJet Ltd for a stake sale are deadlocked over valuation.
Maran is keen to acquire a majority 51-per cent stake in SpiceJet, and is reportedly offering between Rs39 and Rs41 per share, or a total of around Rs700 crore.
However, SpiceJet feels this is too fare below its ruling share price. On Wednesday, SpiceJet shares closed at Rs58, according to which the company's valuation works out to around Rs 1,400 crore. If the two sides resolve the pricing differences, a deal could be announced in the next fortnight, the companies have said.
But Maran apparently wants to pick up a controlling stake in the airline below the ruling share price, as he feels the current market price is too high and not in sync with the fundamentals of the company. For instance, he feels that SpiceJet is valued higher than other airline firms like Kingfisher, whose fleet size is much larger.
Maran is reported to be banking on the stake held by US billionaire and private equity investor Wilbur Ross in the company. Ross has invested $68 million in SpiceJet in July 2008 through foreign currency convertible bonds and has the choice to either convert them or redeem them as bonds - a choice that he has to exercise by this December.
But if Ross converts them, his stake will go up to 31 per cent and he would be then required to come out with the mandatory 20 per cent open offer. Ross is clearly not keen to convert the bonds and is looking to sell his stake. (See: SpiceJet shareholders find Maran's offer too low: report)
Wilbur Ross meanwhile told Bloomberg that offers to invest in SpiceJet were under consideration. Neither SpiceJet nor Maran's office were willing to comment officially on the widespread reports.