NEW DELHI: Etihad Airways, which is widely expected to
buy up to 24% stake in Jet Airways, could get equal board representation in the
Indian company, people close to the development said. The Abu Dhabi-based
airline is also expected to step up its stake in Jet in phases to 49%, though
this could happen over a number of years, they added.
The two sides are believed to be very close to striking an agreement after months of intensive negotiations. On Thursday, Jet AirwaysBSE 2.02 % promoterNaresh Goyal and Etihad Airways CEO James Hoganmet Civil Aviation Minister Ajit Singh and discussed their plans for an alliance. Hogan also met Commerce Minister Anand Sharma.
Though the airline management refrained from commenting about the deal after meeting the minister, government officials told ET that the deal could be announced within a week.
"Etihad will get 50% representation on Jet's board immediately after buying up to 24% equity stake. The Jet Airways CEO will also be jointly decided, even though Jet is the majority shareholder," an official said.
Etihad is expected to invest $300 million in Jet for the 24% stake, valuing the Indian carrier at $1.2 billion, or 6,380 crore, which is 19% higher than the current market cap of 5,371 crore.
Jet shares rose as much as 3.4% on Thursday to 614.80.
The stock has nearly doubled in the last three months on speculation about the stake sale. If the deal fructifies, Jet Airways will be the first beneficiary of the new FDI rules cleared by the government last year. The deal will come exactly 17 years after Goyal bought back the 40% owned by Gulf carriers in his airline when FDI in aviation was disallowed.
"At a later stage, Etihad's stake could be increased to 49% by which time the delisting of Jet Airways may be an option as the promoters may find a private structure to be more suitable," Kapil Kaul, CEO, CAPA (India and Middle-East), said.
Etihad met government officials to ensure that its investment in India will not hit regulatory hurdles, and to seek clarity on the issue of protection of rights of minority shareholders. Under Indian company laws, investors get some control over a company only with 26% equity, though some promoters and management have been known to give powers to investors holding a lower stake.
The two sides are believed to be very close to striking an agreement after months of intensive negotiations. On Thursday, Jet AirwaysBSE 2.02 % promoterNaresh Goyal and Etihad Airways CEO James Hoganmet Civil Aviation Minister Ajit Singh and discussed their plans for an alliance. Hogan also met Commerce Minister Anand Sharma.
Though the airline management refrained from commenting about the deal after meeting the minister, government officials told ET that the deal could be announced within a week.
"Etihad will get 50% representation on Jet's board immediately after buying up to 24% equity stake. The Jet Airways CEO will also be jointly decided, even though Jet is the majority shareholder," an official said.
Etihad is expected to invest $300 million in Jet for the 24% stake, valuing the Indian carrier at $1.2 billion, or 6,380 crore, which is 19% higher than the current market cap of 5,371 crore.
Jet shares rose as much as 3.4% on Thursday to 614.80.
The stock has nearly doubled in the last three months on speculation about the stake sale. If the deal fructifies, Jet Airways will be the first beneficiary of the new FDI rules cleared by the government last year. The deal will come exactly 17 years after Goyal bought back the 40% owned by Gulf carriers in his airline when FDI in aviation was disallowed.
"At a later stage, Etihad's stake could be increased to 49% by which time the delisting of Jet Airways may be an option as the promoters may find a private structure to be more suitable," Kapil Kaul, CEO, CAPA (India and Middle-East), said.
Etihad met government officials to ensure that its investment in India will not hit regulatory hurdles, and to seek clarity on the issue of protection of rights of minority shareholders. Under Indian company laws, investors get some control over a company only with 26% equity, though some promoters and management have been known to give powers to investors holding a lower stake.
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