India media baron to buy 38 pct of SpiceJet

By ERIKA KINETZ AP Business Writer

MUMBAI, India (AP) - A south Indian media baron is buying out U.S. investor Wilbur Ross' stake in India's SpiceJet Ltd., the company said, sending the stock of the budget carrier up as much as 6.2 percent on Monday.

Kalanithi Maran, the founder of India's Sun TV Network Ltd., has agreed to buy a 37.7 percent stake in SpiceJet for 7.39 billion rupees ($158.9 million), or 47.25 rupees ($1) a share - a 16 percent discount to Friday's closing price.

This will make Maran, a baron of regional-language media in South Asia, the largest single shareholder in SpiceJet, which is India's second-biggest budget carrier.

Ross is a billionaire investor who specializes in buying stakes in troubled companies and turning them around.

In addition to buying out Ross' holdings, Maran intends to pick up the 7.49 percent stake held by the family of SpiceJet director Bhupendra Kansagra and, per Indian regulations, will make an open offer for an additional 20 percent of shares outstanding.

The details of the deal - which SpiceJet said was approved by the board Friday - were published in an advertisement in India's Business Standard newspaper Monday.

Maran's Sun TV Network operates 20 television channels in four south Indian languages, which it says reach 95 million households in India. It also runs 45 radio stations, four magazines and two daily Tamil-language newspapers. It has a direct-to-home satellite business with 5.5 million subscribers and a film division that releases eight movies a year minimum, according to the company website.

"We feel it's a good thing for the airline. Instead of fragmented holding, we have someone with a larger consolidated holding. That brings some stability," SpiceJet director Ajay Singh said in an interview Monday.

He said that will serve the airline well as it launches an expansion drive. SpiceJet plans to buy at least four new aircraft this year, he said.

Singh said the public offer, at about 57 to 58 rupees a share, would launch Monday or Tuesday.

Shares spiked to 59.6 rupees a share in morning trade on the Bombay Stock Exchange before falling back to close down 1.6 percent at 55.15 rupees a share.

Ross bought $68 million in convertible bonds in SpiceJet in 2008, Singh said.

At the time, global oil prices were spiking and Spicejet was burning through cash.

Spicejet turned a loss of 3.5 billion rupees ($75.8 million) in the financial year ending March 2009 into a profit of 614.5 million rupees ($13.2 million) in the year ending March 2010, as fuel prices fell and air travel rebounded.

"Ross has made plenty of money," Singh said. "He's made near a 100 percent return on his investment."

Dubai World's investment arm, Istithmar, sold its 13 percent equity holding in SpiceJet for almost $40 million to a clutch of investment funds in February, in the wake of Dubai's debt crisis.

Istithmar bought $12 million in convertible bonds at the same time as Ross and converted them into a 6 percent equity stake in the company, which it still holds, Singh said.