The Hindu Business Line : Jet Air buys Sahara for $500 m in all-cash deal

ENDING weeks of speculation, Mr Naresh Goyal, Chairman of Jet Airways, today announced the acquisition of Air Sahara for $500 million (Rs 2,217 crore) in an all-cash deal.

"We have valued Air Sahara at $500 million and we will buy 100 per cent equity in the airline subject to regulatory approvals," Mr Goyal told newspersons after a board meeting held at his residence this morning.

Under the deal finalised on Wednesday evening by Mr Subrata Roy, CMD of the Sahara group, and Mr Goyal at Lucknow, Jet Airways will buy 100 per cent of Sahara Airlines. Once all the approvals are received, Sahara will be merged with Jet.

The acquisition will be financed through internal accruals, Mr Goyal said. "We will not take up any liability (of Sahara)."

With Sahara in its fold, Jet's market share is expected to go up from 37 per cent to nearly 50 per cent and itstotal fleet, 79-aircraft strong. Indian Airlines has a market share of around 35 per cent.

Jet has a fleet of 53 aircraft, the majority of them Boeing 737-800s, deployed on domestic and South-East Asian routes while Sahara has 26 aircraft, all leased.

The stock market welcomed the deal with the Jet Airways scrip gaining Rs 21.20 to end at Rs 1,149.90 on the BSE from Wednesday's close of Rs 1,128.70.

The board of Jet Airways, which will meet on Saturday to consider the third-quarter results, will also finalise a scheme to raise funds in India and abroad for buying more aircraft, said an official.

Jet is unlikely to absorb all the Sahara employees, who number over 4,000. Mr Goyal said that given the demand for pilots, engineers, and mechanical staff, Jet would absorb these staff as well as some cabin crew.

"The integration of Sahara would generate economies of scale, bringing down the cost of operations, while improving revenues and profitability. Further, the parking slots and airport facilities of Sahara would transfer to Jet, which would ease infrastructural constraints," he added.

Mr Goyal also said that the deal was signed after study by auditors, advisors, and consultants, who also studied recent airline mergers, including that of KLM and Air France.

Dismissing a comment that the acquisition was overpriced, he said: "We are sure that what we are paying is a fair value. Jet is a serious company and is committed to its shareholders."

Meanwhile, a news agency report quoted Mr Vijay Mallya as saying that "the acquisition of Air Sahara by Jet Airways was expected and it would not affect Kingfisher Airlines as it is doing "well". The combined entity might have a market share of more than 50 per cent. I am not concerned about it... I wish all the very best to Goyal and Jet Airways."

Mr Mallya was in the race for acquiring Air Sahara, but earlier this month, he withdrew from the race saying that Kingfisher Airlines was doing well and that it was not necessary to acquire one more airline.

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