Biz People

Merger talk boosts Mallya

Billionaire Vijay Mallya's United Breweries Holdings Ltd and Deccan Aviation Ltd rose in Mumbai trading on expectations the planned merger of the airlines he controls will cut costs and boost revenue.

Deccan rose as much as 6.7 percent on the Bombay Stock Exchange and United Breweries gained 6.5 percent.

Chairman Mallya said on Wednesday UB Group's Kingfisher Airlines Ltd, the only Indian customer for the Airbus SAS A380, will combine with Deccan to increase its fleet and fly overseas as early as next year. The merger benefits Kingfisher's plan to start international flights as Deccan has already sought government permission to fly abroad, including to the United States, Middle East and Southeast Asia.

UB Holding will own more than 51 percent of Kingfisher after the merger, which is expected to be completed by March 31, Mallya said. The stock-swap ratio of the merger will be decided after the valuation is complete in four-five weeks.

Kingfisher acquired control of Deccan, India's largest discount carrier, this year as airlines consolidate in the world's second-most populous country to cut losses amid a surge in air travel.

The Kingfisher and Deccan combine, the biggest customer of Airbus in India, aims to challenge Jet Airways India Ltd, the country's largest domestic airline.

Events may force Trichet's hand

European Central Bank President Jean-Claude Trichet, who is trying to stave off both inflation and a credit squeeze at the same time, may soon have to choose sides.

Economists at Deutsche Bank AG, Royal Bank of Scotland Group Plc and Morgan Stanley say Trichet - who told the European Parliament on Wednesday that efforts to deliver price stability and encourage banks to lend are "totally separate" - may be forced to follow the Bank of England and the Federal Reserve in cutting interest rates as higher credit costs hurt the broader economy.

"The bank can't have it both ways," said Kevin Gaynor, head of economics and interest-rate strategy at RBS in London. "It can't have temporary support for the market stretching into six months and yet maintain the fig leaf that monetary policy is based on an unchanged view of economic risks."

Trichet's comments suggest the ECB's intention is to keep pumping cash into banks, while holding its rate at a six- year high of 4 percent to restrain prices.

(China Daily 12/21/2007 page16)