Tata-Jet talks on but no proposal yet; Goyal wants to sell only a part of his stake

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Mumbai/new Delhi | November 17, 2018 3:27 AM

Tata Sons held a board meet on Friday but said it has held only preliminary talks with Jet Airways.

While Tatas want Jet Airways promoter-chairman Naresh Goyal to exit the company, the latter is driving a hard bargain on the same.

Almost a month after reports of a Tata-Jet Airways deal first surfaced, Tata Sons on Friday confirmed that it has held “preliminary” discussions on the matter but not made any concrete proposal for taking over the cash-strapped, struggling airline. So far, the company was maintaining that it does not comment on speculation.

“Over the last few days there has been growing speculation in the print and electronic media about Tata’s interest in Jet Airways. We would like to clarify that any such discussions have been preliminary and no proposal has been made,” a Tata Sons statement said.
Separately, industry sources said the Tata Sons board, which met on Friday, was still evaluating various options for taking over Jet Airways, which are acceptable to both the sides. Sources said several more meetings would take place and any announcement would take time.
While Tatas want Jet Airways promoter-chairman Naresh Goyal to exit the company, the latter is driving a hard bargain on the same.

On Thursday, Jet Airways had informed the stock exchanges that reports (on merger of Vistara with Jet)
is purely speculative in nature and that there are no discussions or decisions by the board, which would require a disclosure.
However, in a post-earnings call with analysts, Jet’s deputy chief executive and chief financial officer Amit Agarwal had admitted that the company was in talks with multiple interested parties for fund infusion as well as selling six of its Boeing 777 planes and a stake in its loyalty progarmme Jet Privilege.

Sources said that the proposal which Tata Sons is favouring is a share swap agreement kind of merger plan of Jet Airways with Tata-SIA-run full service airline Vistara, while eventually giving an exit to Jet’s promoter Naresh Goyal. The advantage in this approach would be that there would not be any substantial cash outgo. Tatas also want Goyal and family to sign a non-compete clause that bars them from entering aviation business for a substantial period of time. Goyal reportedly has reservations on this.

Since Goyal needs funds at this stage, sources said that he’s favouring a line of partially selling his take to the Tatas for a limited period of time at the end of which he has the option to buy it back. He also wants a board seat.
There’s also a section in the Tata Group which is favouring buying only specific assets of Jet Airways and not the entire company, which is saddled with liabilities. Jet has international presence, attractive slots, and possesses wide-bodied aircraft, all of which make it attractive. However, it has a gross debt of Rs 8,411 crore and other liabilities amounting over Rs 11,000 crore in addition to unknown vendor payments liability and unpaid lease rentals.

Goyal, along with his family, owns 51% stake in Jet, while the Gulf carrier Etihad Airways holds 24%. The airline posted a net loss of Rs 1,267 crore during the July-September quarter.
Tatas are in airline joint ventures — AirAsia India and Vistara — which have accumulated losses of over Rs 2,100 crore and these operations are yet to stabilise and need expansion which needs more funds.

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