Mumbai Airport: Adani is top airport firm with GVK buy

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September 1, 2020 7:45 AM

There could be some legal hitches in the completion of the deal as a consortium of foreign investors which had earlier signed a binding agreement with GVK Group for buying the asset, has legally challenged the deal with Adani Group.

The Adani Group apart from acquiring the 50.5% stake of GVK Group will also acquire 10% of Airports Company of South Africa and 13.5% of Bidvest. The balance 26% is held by the Airports Authority of India (AAI).

The Adani Group is set to emerge as the largest player in the airports business in terms of number of projects as it struck a deal on Monday to acquire the controlling 74% stake in Mumbai International Airport (Mial) from the GVK Group and other partners. As part of the deal, it will also have control of 74% in the Navi Mumbai airport project.
The Adani Group through its Adani Airport Holdings (AAHL) will take over GVK Airport Developers’ debts, and also acquire Bidvest and Airports Company of South Africa’s stake in MIAL. GVK ADL is the holding company through which GVK Group holds 50.50% equity stake in Mumbai International Airport, which in turn holds 74% equity stake in Navi Mumbai International Airport.

The Adani Group apart from acquiring the 50.5% stake of GVK Group will also acquire 10% of Airports Company of South Africa and 13.5% of Bidvest. The balance 26% is held by the Airports Authority of India (AAI).

Bidvest and ACSA had earlier agreed to sell their stakes to Adani Group but the GVK group had moved court to block the deal citing the clause which gave it the right of first refusal. The GVK Group was given time to raise the funds for the same but it hasn’t been able to do so and finally capitulated to the Adani Group.

Though the valuations and financial terms of the deal were not disclosed, GVK Group outlined the contours which entails acquisition of debt by Adani Group from various GVK lenders, including a Goldman Sachs-led consortium and HDFC. The GVK Group is to be released from various obligations, securities and corporate guarantees given in respect of the debt to be acquired by Adani Group. The Adani Group will have the option of converting the acquired debt to equity in GVKADL, on mutually agreed terms, subject to obtaining necessary regulatory approvals.

The GVK Group’s entire stake in Mial is pledged and the debt of Mial and GVK Airports developers together stand at around Rs 10,847 crore.

With this deal, the Adani Group, which has recently bagged the rights to operate, develop, and maintain six new airports under public-private partnership (PPP), will emerge as the country’s second largest airport operator in terms of number of passengers handled, after the GMR Group, which operates the Delhi and Hyderabad airports. If Adanis seven airports, including Mial is taken into account, they handled a total of 75 million passengers in FY20.

GMR’s Delhi and Hyderabad handled 85 million passengers. GVK Group and Adani Group have agreed that AAHL will offer a stand-still to GVK, in addition to release of the guarantee given by GVK Power and Infrastructure with respect to the debt acquired by it.

A standstill agreement is a form of anti-takeover measure where a violation can effectively stall or stop the process of a hostile takeover if the parties cannot negotiate a friendly deal. “The Adani Group will also take steps to complete the acquisition of a 23.5% equity stake from ACSA and Bidvest in Mial for which it has obtained CCI approval,” Adani Enterprises said in a statement. “AAHL intends to infuse funds into Mial to ensure that Mial receives much needed liquidity and also achieves financial closure of Navi Mumbai International Airport to be able to commence construction,” the statement added.

There could be some legal hitches in the completion of the deal as a consortium of foreign investors which had earlier signed a binding agreement with GVK Group for buying the asset, has legally challenged the deal with Adani Group.
The consortium led by UAE’s sovereign fund Abu Dhabi Investment Authority (ADIA), India’s sovereign fund NIIF and Canada’s Public Sector Pension Investments (PSP), have served a legal notice to the GVK Group and lenders saying that selling stake in Mial to Adani Group will be breach of the agreement they had entered in October 2019.

“The aviation industry has been severely impacted by COVID-19, setting it back by many years and has impacted the financials of Mumbai International Airport. It was therefore important that we bring in a financially strong investor in the shortest possible time to improve the financial position of Mial, as well as to help achieve financial closure of the Navi Mumbai International Airport project, which is a project of national importance. It is under these circumstances that we agreed to cooperate with Adani so as to achieve these twin objectives,” GVK Reddy, founder and chairman, GVK said in a statement.

The statement added that GVK has terminated its agreement with ADIA, NIIF and PSP Investments, signed last year, for its airports business.

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