More than a year after the announcement of Jet-Etihad deal, the two airlines have cleared the last regulatory hurdle in India.
The stock market regulator, Securities and Exchange Board of India (Sebi), on Thursday said the Abu-Dhabi based Etihad Airways, which acquired 24% stake in Jet Airways, need not make an open offer to Jet shareholders.
Jet-Etihad was the first deal to be announced in April last year after the government allowed 49% foreign direct investment (FDI) in Indian aviation companies. Etihad purchased a 24% stake in Jet in Rs 2,058 crore deal.
Since the announcement, the deal has met several regulatory hurdles, especially over the issue of control. The deal, which was completed late last year, had to be restructured in order to address concerns raised by Sebi and Competition Commission of India (CCI).
CCI had observed Etihad was getting "significant rights" and "joint control" in running Jet.
On the basis of this, Sebi issued a show-cause notice to Etihad on why action should not be taken against it for not making an open offer, as it was getting into a controlling position in Jet by way of 24% stake purchase.
Under Sebi norms, an entity acquiring control in a listed company of up to 25% has to make an open offer to the target firm's shareholders.
In its reply to Sebi, submitted in March, Etihad has contended that the deal was closed after all necessary regulatory clearances, and that it was not obliged to make any open offer.
In an order issued by the market regulator on Thursday said, "Voluntary changes have been made to ensure that there is absolute certainty that effective control of Jet Airways is and continues to vest in Indian nationals and the board of Jet Airways."
"It was never the intention of Etihad to acquire control in any manner over Jet Airways. The FIPB had approved the deal/transaction on being satisfied that the effective control over Jet remained with Indian nationals even consequent to the Transaction Documents. Further, the transaction documents do not confer any control on Etihad over Jet under the Takeover Regulations, 2011," the order said.
Jet did not offer any comment.
Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, said, "This allows Jet to leverage the synergy benefits of Etihad network. The new government should consider raising the FDI limit in airlines from 49% to 100%, as per the Mayaram Committee report. All the precious manhours spent by the government agencies and regulators on evaluating a subjective concept called 'control' in a private corporate entity could have been put to better use." Despite the regulatory hurdles and the delay in getting overall clearance, James Hogan, CEO of Etihad, recently told reporters in Abu Dhabi that the airline remains committed to the Indian market considering huge opportunities for growth.
"This is first FDI in India, and of course it is going to go through a process and we accept that," he had said.