Mumbai: Vijay Mallya`s UB Group has acquired 26 per cent stake in Deccan Aviation Ltd for Rs550 crore. UB Holdings would also launch an open offer for another 20 per cent stake in the low-cost airline.

The transaction, which values Air Deccan at Rs155 a share, would be through allotment of 96,77,419 fully paid-up equity shares to UB, Air Deccan managing director G R Gopinath he said.

UB has paid an advance of Rs150 crore and the remaining amount would be paid in the next four weeks, he told reporters after the company`s board meeting.

UB Group, which owns premier carrier Kingfisher Airlines, would eventually control 46 per cent of Deccan Aviation that runs the low-cost carrier Air Deccan after the open offer.

This is the third M&A deal in the domestic aviation space, after Jet Airways-Air Sahara and merger of Air-India and Indian, this year.

Last year, Tata Group acquired under 10 per cent stake in another budget carrier SpiceJet.

Deccan Aviation and kingfisher Airlines together would have a fleet of 71 aircraft, 70 destinations and 33 per cent market share, said Gopinath, who would continue as executive chairman of the board, while Mallya would be the vice chairman.

The promoters and investors would have equal number of directors, besides six independent directors.

Gopinath said a team would be appointed next week to work out operational synergies with UB Group, which runs the premier full-service, true-value carrier Kingfisher Airlines.

The two airline companies would sign a separate shareholders agreement in the near future, Deccan Aviation said in a filing on the Bombay Stock Exchange.

UB Group CFO Ravi Nedungadi said Air Deccan would continue to be an independent listed entity while Kingfisher will also remain as a separate entity.

Asked if there were plans to merge the two carriers, he said "Never say never...But that`s not our immediate priority. It is too early for us to be taking harsh decisions".

On the feasibility of having two airlines with completely different formats, he said: "In India there is a market for both low-cost and full service, which are at the opposite ends of the price spectrum."

Gopinath said negotiations were going on with various investors and "keeping in mind the various factors, we have chosen UB holding to invest up to 26 per cent." Air Deccan`s board also unanimously approved the open offer.

"Give me an opportunity and I will give you the best offer," Gopinath quoted Mallya as saying.

Gopinath said a CEO of Air Deccan would be appointed by the board in consultation with him and Mallya. He said the company had interviewed six candidates for COO`s post and would be announced shortly.