Mumbai, Oct. 1: Capital markets regulator Sebi today approved the sale of a 24 per cent stake in Jet Airways to Abu Dhabi-based Etihad Airways, removing a major hurdle to the closure of the Rs 2,058-crore deal that was struck on April 25.
The Foreign Investment Promotion Board (FIPB) had cleared the deal in July.
The two sides were forced to renegotiate the shareholders’ agreement that underpinned the deal to drown criticism that it conferred on Etihad overweaning powers over the domestic airline.
The regulator has now said that the revised shareholding structure does not give controlling powers to Etihad. It also said Etihad would not be obliged to make an open offer to Jet shareholders and the two airlines would not be treated as persons acting in concert.
“The rights proposed to be acquired by Etihad do not, prima facie, appear to result in a change in control and, consequently, do not attract the provisions of the Takeover Regulations of 2011,” Sebi said.
The Jet–Etihad agreement had set a July 31 deadline for securing all regulatory and government approvals. The date was extended to September 30 and will in probability have to be extended again.
The deal is likely to be placed before the cabinet committee on economic affairs (CCEA) this week. Market mavens expect the CCEA to clear the deal as well.
The Competition Commission of India (CCI) has also sought changes in the original deal. The two parties had informed the fair trade regulator about the changes and approval from the CCI is also expected soon.
Sebi is learnt to have informed the government of its stand on the Jet-Etihad deal more than a week ago. Jet Airways had proposed to make a preferential allotment of shares to Etihad to give it a 24 per cent stake.
The market regulator reportedly has also asked Naresh Goyal-led promoters to divest an additional 6 per cent stake before allotting the shares to Etihad “in the interest of corporate governance and to ensure well dispersed public shareholding”.
Goyal will eventually have a 51 per cent stake in the company, Etihad 24 per cent and the public will hold the remaining 25 per cent.
Jet Airways’ 12-member board of directors will have four representing Goyal’s interests, two from Etihad and six independent directors.
Shares of the airline rose today on hopes that the deal will soon be cleared. It gained more than 3 per cent, or Rs 11.45, to close at Rs 370.85 on the BSE.
But there is one problem that still lingers.
Earlier this month, BJP MP Subramanium Swamy had filed a petition in the Supreme Court demanding a CBI investigation into the role of the Ministries of Civil Aviation and External Affairs in amending the India-Abu Dhabi bilateral Air Service Agreement (ASA) which granted 36,670 additional seats to airlines between the two countries.
The air services agreement was signed on April 24 – a day before the Jet-Etihad deal, sparking speculation that the seat-sharing agreement was the “sweetener” for the stake buyout by Etihad. The government has denied any link between the two agreements.
The petition is yet to be heard.