"The Jet-Etihad deal has been approved. This is good both for passengers and the industry. It took time as the deal had to be scrutinized by many regulatory agencies," said civil aviation minister Ajit Singh. Sources said the CCEA did not take time to give the approval as Jet and Etihad had complied with all the requirements raised previously, essentially centered around "ownership and effective control" remaining with the Indian partner. The Jet scrip closed 4.2% higher at Rs 386 on the BSE on Thursday in anticipation of this nod. Now, only the Competition Commission of India needs to approve the deal. The CCEA clearance comes close on the heels of the government approving the Tata-AirAsia budget carrier and the Tata-Singapore Airlines' JV for a luxury airline is likely to be given the nod too.
The Jet deal, among the first to be announced after the government allowed foreign airlines to invest in desi carriers last September, will see Etihad picking up a 24% stake in Jet for $379 million (about Rs 2,060 crore). Apart from this, the Abu Dhabi-based carrier will give the Naresh Goyal-promoted airline $300 million as low-cost debt, pay $150 million for buying a share in Jet's frequent flyer programme and get three slots of Jet at London Heathrow for $70 million.
Jet announced the deal with Etihad on April 24. It became controversial because the aviation ministry gave away additional flying right of 37,000 seats (spread over three years) to Abu Dhabi on the same day, just hours after the tie-up. A number of lawmakers opposed the deal, calling the liberal grant of bilateral as the real deal clincher at a massive premium for Jet.The Foreign Investment Promotion Board (FIPB) in June deferred approving the deal, following fears raised by it and market regulator Sebi that Jet's "effective control and ownership" would be ceded to Etihad under the terms of the original SHA (shareholder agreement). To allay these fears, Etihad substantially diluted its contro l over Jet. On July 29, FIPB gave a conditional go-ahead to the deal. It had asked Jet-Etihad to drop the clause that their shareholders' agreement (SHA) will be governed by British law and instead put it completely under Indian laws, something which has been done.
Etihad will now have two directors in the 12-member Jet board and not three as proposed earlier. Jet's promoter Naresh Goyal will have a "casting vote on any matter".
The place of business of Jet will remain in India and not be shifted to Abu Dhabi. Under a debt of Rs 12,500 crore along with trade payables of Rs 4,757 crore, the Jet Group desperately needed fund infusion. The airline group has accumulated Rs 4,500 crore as losses in past five years and rapidly lost domestic market share to IndiGo, ceding to it the leader spot in domestic air travel.
With Etihad's funding, Jet - which will now be owned 51% by Naresh Goyal, 24% by Etihad and the rest by public - proposes to reduce its Rs 12,500-crore debt burden. The airline is going to enhance its 100-strong fleet size and launch flights to Europe, North America, Afr ica and Middle East from Abu Dhabi - which will be connected to 23 Indian cities on Jet's network.
via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHHF87y1lpdOLS__gBqikFq77ZJNA&url=http://timesofindia.indiatimes.com/business/india-business/CCEA-clears-Rs-5-3k-cr-Jets-deal-with-Etihad/articleshow/23487483.cms
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