Jet-Etihad deal: Officials meet SEBI; seek to address control issue
Mumbai: Representatives of Jet Airways and Etihad Airways Wednesday met SEBI officials and sought an early clearance to their Rs 2,060-crore deal from the capital market watchdog.
The meeting took place following the regulator's apprehension about the UAE carrier's indirect control of the Naresh Goyal-promoted airline, in which it acquired a 24 percent stake, and seeking to know why the Gulf carrier should not be made to make an open offer to the Jet shareholders.
Legal representatives of Jet and Etihad are understood to have told SEBI officials about various interpretations of the word "control" under different Indian laws, sources said.
The Jet-Etihad team, which included senior executives and counsel Janak Dwarkadas, stressed on the meaning of "control" as defined under the SEBI Act and under laws governing fair trade practices, the sources said.
SEBI had reportedly issued a show-cause notice to Etihad, seeking explanation as to why it should not make an open offer to Jet's public shareholders under the rules.
According to reports, law firm Amarchand & Mangaldas and Suresh A Shroff & Co has been hired by Etihad for representation to the SEBI. Today's representation was made before SEBI whole-time member Rajeev Agarwal.
"We have presented our side and will await the final order from SEBI with regards to the case," the sources said.
The regulator in January announced a re-look at the landmark deal after the Competition Commission raised concerns over the aspect of control even though technically Etihad has picked up only 24 percent stake in the Indian carrier.
The problem arose after Jet offered more board positions to Etihad than the former can seek under rules considering the minority stake it bought in the private carrier.
"It is observed the parties have entered into a composite combination comprising inter alia the IA (investment agreement), SHA (shareholders' agreement) and CCA (commercial co-operation agreement), with the common/ultimate objective of enhancing their airline business through joint initiatives.
"The effect of these agreements, including the governance structure envisaged in the CCA, establishes Etihad's joint control of Jet, more particularly over the assets and operations of Jet," Competition Commission of India (CCI) said in a order dated November 12.
The fair trade body also observed that "Etihad's acquisition of 24 per cent equity stake and the right to nominate two directors, out of the six shareholder directors, including the Vice-Chairman in the board of directors of Jet, is considered as significant in terms of Etihad's ability to participate in the managerial affairs of Jet."
BJP leader Subramanian Swamy had written to SEBI asking Etihad to be considered a 'person acting in concert' with Jet's current promoters for this deal.
Jet and Etihad last year said all requisite regulatory approvals from Indian authorities had been obtained on November 12, 2013.
The Jet-Etihad pact, inked in September last, was the first FDI in the domestic aviation after the sector was opened up in September 2012 for foreign players.
The deal includes selling Jet's slots in the Heathrow airport in London for USD 150 million to Etihad, the Gulf carrier picking up 50 per cent stake in the loyalty programme Jet Privilege for USD 70 million and Etihad offering a USD 150 million soft loan to the Indian carrier.