UB planning to sell 20% stake in its aviation business

United Breweries (Holdings) is planning to sell about 20% stake in its consolidated aviation business—comprising Kingfisher Airlines and Air Deccan—to private equity investors. It hopes to raise around $250 million through the equity dilution. Four private equity giants, including Cerberus Capital, TPG and Blackstone, have initiated talks. Cerberus is believed to be the front-runner.

The stake, sources said, is being sold in a subsidiary of UB (Holdings), which owns 83% of Kingfisher Airlines and 100% of Kingfisher Radio. Kingfisher Radio, in turn, holds 26% in Deccan Aviation, the parent of the low-cost airline. The proposed open offer, if successful, will take Kingfisher Radio’s stake in Deccan Aviation to 46%.

The UB Group has already raised Rs 550 crore as debt from IDFC, HDFC and IL&FS for its purchase of Deccan Aviation. It is currently in the process of raising another Rs 430 crore to fund the open offer.

This will take its debt to around Rs 1,000 crore. Sources said the plan is to pay back the expensive debt through private equity funds. UB is waiting for Sebi’s clearance for the open offer at Rs 155 per share. Sources said the group is confident of getting participation from major shareholders, including ICICI Bank and Capital One.