The Telegraph
Friday , May 9 , 2014
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Sebi tailwind for Jet-Etihad deal

Mumbai, May 8: In a relief for Jet Airways and Etihad, Sebi today said the Abu Dhabi carrier will not have to make an open offer to Jet shareholders pursuant to the Rs 2,060-crore stake deal between them.

Clearing the regulatory hurdles to the high profile deal, the Securities and Exchange Board of India (Sebi) also ruled that Etihad “has not acquired control over Jet”.

Etihad purchased a 24 per cent stake in Jet Airways in a deal announced in April last year.

The deal ran into trouble when the market regulator decided to review it following concerns raised by the Competition Commission that Etihad held “joint control” over the airline even though the Abu-Dhabi airline had picked up only a 24 per cent stake in the carrier. With Sebi going through the deal again, the appointment of key personnel in the airline was held up.

Under Sebi norms, an entity acquiring control in a listed company has to make an open offer to the target company’s shareholders.

In the much awaited order issued today, Rajeev Kumar Agarwal, wholetime member of Sebi, said Etihad did not have joint control over the airline. Etihad also cannot be termed as a person acting in concert (PAC) along with the promoters of Jet, he added.

Though the Competition Commission of India (CCI) had cleared the deal, it had averred that Etihad’s acquisition of 24 per cent in Jet and the right to nominate two of the six shareholder directors, including the vice-chairman, on the airline’s board spoke volumes about its ability to participate in the managerial affairs of Jet.

The CCI went on to add that the airlines entered into a composite combination comprising investment agreement, shareholders agreement and commercial co-operation agreement (CCA) with the ultimate objective of enhancing their airline business through joint initiatives. It, therefore, maintained that the effect of these agreements, including the governance structure envisaged in the CCA, established Etihad’s joint control over Jet Airways, more particularly over the assets and operations of the airline.

Responding to these observations of the CCI, Sebi said under the CCA, Etihad can appoint two directors on the board of Jet Airways out of a total of 12 and this will be applicable only till it holds at least 15 per cent in the airline.

Further, the existing promoters of the airline will have the right to nominate one of the promoter board members as the chairman and the latter will have a casting vote in all meetings.

Moreover, Etihad would not have any veto or blocking rights at board or general meetings or any casting vote rights.

Further, voluntary changes were made in the deal to ensure that effective control of Jet remained with Indian nationals and the board of the airline.

“...the fact that existing promoters hold 51 per cent shares and voting rights in Jet strengthen the stand of Sebi as communicated to the ministry of finance vide letter dated September 25, 2013 that Etihad cannot be termed as a person acting in concert along with the existing promoters of Jet under Takeover Regulations, 2011,” the regulator said in its 17-page order.