 "Jet Airways-Etihad set to miss deal closure deadline")
The Jet Airways-Etihad deal is likely to miss its transaction closure deadline in the absence of various regulatory approvals. In April the two airlines signed the deal under which Abu Dhabi based Etihad agreed to pick up 24% stake in Jet Airways.
The agreement has a clause called the 'long stop date' which stipulates that all regulatory approvals will be secured by July 31. The approvals are necessary for the conclusion of the transaction. While both the sides can extend the deadline, the agreement also allows for termination of the deal if the conditions precedent (regulatory approvals) are not met.
The Rs 2060 crore deal and the allotment of additional traffic rights to Abu Dhabi has turned controversial. Opposition MPs and politicians including Janata Party chief Subramanian Swamy has demanded that additional traffic rights be scrapped and regulators are seeking a revision in the agreement as it confers too many powers to Etihad.
The agreement requires approval from Securities and Exchange Board of India, Competition Commission of India, Foreign Investment Promotion Board and finally Cabinet Committee of Economic Affairs. So far the airlines have not secured approval from any of them.
"The agreement was signed on April 24. But due to regulatory concerns the airlines have to revise the agreement and make fresh applications to the Sebi and FIPB to show that the suggested amendments have been incorporated in the agreement,'' said a source familiar with the development. The controversy surrounding the deal, the political opposition and regulatory pressure has caused some anxiety in Abu Dhabi but Etihad is not pulling the plug yet, he added.
“Both parties are working towards achieving the regulatory approvals before the long stop date of 31 July 2013 stipulated in the agreement. We are not in a position to comment further at this time,'' Etihad Airways said in a statement.
The shareholder agreement between the two airlines was first revised in May to assuage regulatory concerns. More changes are expected to fulfill regulatory requirements. FIPB too has raised concerns over clauses which state 3/4th of majority is required to pass board resolutions and shifting of revenue management office to Abu Dhabi.
One of the key changes made in May ensured that Etihad will not have the unilateral right to terminate the commercial cooperation agreement and this right will now be held by both sides. The other change pertained to constitution of the nomination committee of the board, which will make key board and management appointments.
Civil aviation minister Ajit Singh told Business Standard last week his ministry too had raised concerns about the shifting of the office to Abu Dhabi. “According to the rules, two-third of directors of the company have to be Indian citizens. Further, substantial ownership and place of business has to be in India and the effective control has to be in Indian hands,” added Singh. He said FIPB will check if the shifting of revenue management office to Abu Dhabi violated rules.