Jet Airways today won conditional nod to sell 24 per cent stake to Etihad Airways for Rs 2,058 crore after the Abu Dhabi-based carrier made significant concessions diluting its control.
“We have approved (the Jet-Etihad deal) with some conditions,” Economic Affairs Secretary Arvind Mayaram told reporters after a meeting of the Foreign Investment Promotion Board (FIPB).
The conditions include Jet Airways seeking prior Government of India approval for any changes in the Share Holders Agreement (SHA) with Etihad Airways as also for any change in shareholding in the company.
Also,all shareholder disputes and disputes under SHA would have to be adjudicated under Indian law as opposed to English law as proposed in the revised SHA submitted just before the FIPB meeting. Any other arbitration can happen under English law.
Besides agreeing to these changes,Jet-Etihad will have to submit new Articles of Association before the deal is put before Finance Minister P Chidambaram for approval and then to the Cabinet Committee on Economic Affairs.
Jet will need government approvals for any future change in shareholding agreement,a source privy to the deliberations at the FIPB meeting said.
The deal won regulatory nod after a revised shareholder agreement decreased Etihad’s presence on the board of Jet,addressing concerns that Etihad appeared to be taking control of the Indian airline.
Etihad will now take two seats on the 12-member board instead of three previously proposed. The Indian partner,Naresh Goyal,besides appointing four board members,will have the right to nominate the chairman,whereas Etihad will appoint a vice chairman.
Ahead of the FIPB meeting,Jet dropped a clause from its earlier application of shifting revenue management to Abu Dhabi. Etihad agreed to vest Goyal,the founder chairman of Jet,with the right to deliver a “casting vote on any matter”. Last month,the FIPB had said it wanted more details on who would be effectively in control of Jet Airways after the deal before making a decision.
In the revised SHA,the Abu Dhabi-based airline agreed to make only recommendations about suitable candidates for top positions in Jet Airways as opposed to it getting the right to source senior management as per the original agreement.
Under the original proposal,four directors were to be nominated by Jet Airways and three by Etihad,besides seven independent directors of which at least six had to be Indian citizens.
The revised proposal seeks to address the concerns of FIPB and market regulator Sebi with regard to ‘effective control’ after the foreign direct investment (FDI),which will be the largest FDI in the aviation space.
However,there will be no change in the shareholding pattern with Etihad picking up 24 per cent,key promoter Naresh Goyal holding 51 per cent and 25 per cent with others,including institutions and individuals.
Ahead of the announcement,shares of Jet jumped 4.2 per cent to Rs 412.20 on BSE at close.
While Etihad will again access to a fast growing market,the deal will give Jet Rs 2,058 crore for fleet expansion and paring debt after six years of losses caused by a price war and high fuel costs.