Jet Airway’s proposed sale of 24% stake to Abu Dhabi-based Etihad has been given the green light by the Securities and Exchange Board of India (Sebi) as the regulator found that the deal, in its revised form, does not give controlling powers to the foreign carrier and is in compliance with the regulations.
Sebi, after studying the revised structure, observed that the R2,058-crore deal should not trigger a mandatory open offer for purchase of shares from public shareholders and Etihad would not be considered a promoter entity in Jet Airways.
However, Sebi has left it to the government to take a final call on the revised Commercial Cooperation Agreement (CCA) proposed by Jet and Etihad Airways, sources told PTI, while adding that these observations have been issued as per the given facts about the proposed deal. Jet has proposed to make a preferential allotment of shares to Etihad to give it a 24% stake.
In the meantime, Sebi has also asked Naresh Goyal-led Jet promoters to divest 6% stake before allotting the shares to Etihad “in the interest of corporate governance and to ensure well dispersed public shareholding”.
Sebi will then not consider them Persons Acting in Concert. However, if the government arrives at a conclusion that there is change in control then Sebi would insist on an open offer. Goyal would eventually have a 51% stake in the company, Etihad 24% and the remaining 25% would be with the public. The combined promoters stake will thus not exceed 75% as laid down by the minimum public shareholding norms for listed companies.
The Jet-Etihad deal, which was announced in April, has faced a number of hurdles including concerns raised by Sebi as it was initially deemed to yield significant control of the airline to Etihad. The Foreign Investment Promotion Board had earlier approved the deal in July with some conditions after both Jet and Etihad had assured that ‘effective control’ would remain with local promoters — Jet Airways.
Approval from the Competition Commission of India is expected soon as both parties informed the regulator about the changes in the deal.