Sebi says yes to Jetihad
Oct 01 2013 , Mumbai
After studying the revised deal structure, Sebi was of the opinion that the Rs 2,058 crore transaction would 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 proposed by Jet and Etihad. The deal, announced in April, has been stuck in regulatory hurdles.
Regulators, including Sebi and the Competition Commission of India, and other agencies, raised objections on the ground that the deal was designed to provide Etihad with significant control of Jet Airways.
In July the deal was approved by the foreign investment promotion board with some conditions, after both parties assured that “effective control” would remain with the local promoters.
The proposal will go before the cabinet committee on economic affairs. The Competion Commission had also sought changes in the original deal. The two parties had informed it about the changes made in the deal. An approval from the commission is expected soon.
Sebi is believed to have said that Etihad will not be required to make an open offer to Jet shareholders and the two airlines will not be treated as persons acting in concert.
“The rights proposed to be acquired by Etihad do not, prima facie, appear to result in a change in control and, consequently, do not attract the provisions of takeover regulation of 2011,” Sebi was quoted by PTI as saying.
On September 25 Sebi informed the finance ministry about its stand, and these observations were also communicated to Subramanian Swamy, who had raised objections to the deal and had written to the regulator.
Jet has proposed to make a preferential allotment of shares to Etihad to give it a 24 per cent stake.
Sebi has asked Naresh Goyal-led Jet promoters to divest 6 per cent before allotting the shares to Etihad “in the interest of corporate governance and to ensure well dispersed public shareholding.” Goyal will eventually have 51 per cent in the company, Etihad 24 per cent and the public 25 per cent.
According to an analyst with a Mumbai-based stock broking firm, the Sebi approval is likely to ease the approval process. “Jet Airways will only receive funds after all approvals are given. However, the Sebi announcement that no open offer required will be a negative for minority shareholders. But, overall, we don’t see any negative concern as any approval is likely to have positives on the stock performance,” the analyst said.
On Tuesday, Jet shares closed at Rs. 370.85 on BSE, up 3.19 per cent from the previous close.