Etihad may not have to make open offer to Jet Airways shareholders

Mumbai: India’s capital market regulator is likely to pass a final order on Etihad Airways PJSC regarding its ₹ 2,058 crore purchase of a 24% stake in Jet Airways (India) Ltd in the next few days, two people close to the development said on Wednesday.

They spoke after executives of the United Arab Emirates’ Etihad Airways argued before the Securities and Exchange Board of India (Sebi) on Wednesday that the acquisition of stake in Jet Airways last year was in line with India’s takeover rules.

“Etihad Airways officials, along with their lawyers, met a whole-time member of Sebi to clarify that it has not violated the takeover rules through a lengthy argument. Sebi has reserved its order and is expected to pass a final order in next few days,” said one of the people quoted above. Both declined to be named.

Sebi issued a notice to Etihad Airways earlier this year, asking it to explain why it should not make an open offer to Jet’s public shareholders under the rules. An open offer is required to be made if an acquirer buys at least a 25% stake in a target company or if a significant change in management control accompanies a stake purchase below the threshold.

A final clearance from Sebi is critical for both Jet Airways and Etihad Airways, as key personnel appointments have been delayed because of Sebi’s decision to look into the deal again despite the transaction winning approvals from the Union cabinet in October and antitrust regulator Competition Commission of India (CCI) in November.

“Etihad Airways has argued that it is not agreeing to the way CCI is observing the word ‘control’. The lawyers of Etihad Airways had pointed out that both CCI and Sebi are governed by two different Acts,” the second person said.

While giving its approval, CCI said the deal gave Etihad Airways significant “control” over Jet Airways.

Mint could not immediately contact Etihad Airways for a comment.

A Sebi spokesperson declined to comment.

In October, Sebi approved Etihad’s purchase of the 24% stake in Jet Airways, observing that the deal would not trigger a mandatory open offer for the purchase of shares from public shareholders and Etihad would not be considered a promoter entity in Jet Airways. Public shareholders own 25% of Jet Airways.

Sebi’s continuing scrutiny is having an impact on day-to-day operations at Jet Airways because it is unable to appoint a new chief executive officer. Last month, Jet Airways’ acting chief executive officer (CEO) Ravishankar Gopalakrishnan resigned, continuing an exodus of senior executives following the signing of the deal.

Willy Boulter, Etihad’s vice-president (commercial and network planning), who was head (commercial) at Jet Airways after the Etihad-Jet deal, has become the latest to quit, taking the number of executives leaving the airline since the deal to six.

Boulter has returned to Etihad.