Financial Daily from THE HINDU group of publications
Tuesday, Mar 21, 2006
Logistics - Mergers & Acquisitions
Deal with Air Sahara intact, says Goyal
All in the air
With the escrow account set up to facilitate the deal closing on March 24, officials from both sides would meet in the next three days.
Jet is awaiting Government approval for the share purchase agreement and security clearance of the board of directors which was filed by Air Sahara.
Mumbai , March 20
Quelling market rumours that the agreement to acquire Air Sahara by Jet Airways is in trouble, Mr Naresh Goyal, Chairman, Jet Airways, said the deal is "intact and in good shape."
"Nothing has changed since we signed the agreement to buy out Air Sahara on January 19 last," he told presspersons at his residence here on Monday.
The rumour doing the rounds was that there were issues yet to be resolved between the two companies. With the deadline for closing the deal only a few days away, there was speculation that the deal may fall through.
Earlier in the day, Mr Goyal had a meeting with some of the board members of Jet Airways.
With the escrow account set up to facilitate the deal closing on March 24, officials from both sides would meet in the next three days to chart the future course of action, Mr Goyal said.
Jet is awaiting Government approval for the share purchase agreement and security clearance of the board of directors. This application was filed by Air Sahara, he said.
Meanwhile, the application made by Jet Airways to the Department of Company Affairs for an approval has been cleared, he said.
Asked about the delay in receipt of Government approval for the change of ownership, Mr Goyal said this is the first instance of a merger between two airlines in the country and the Government may be taking its time with clearances.
Jet has agreed to pay Sahara Rs 2,000 crore for the buyout; this amount would take into account all the liabilities of Sahara, he said. Under the agreement signed for the buyout on January 19, Jet had put an enterprise value of $500 million (Rs 2,217 crore) on Air Sahara.
On the status of its application to commence US operations, Mr Goyal said the Ministry of External Affairs would have to send its reply to the US Department of Transport. The commencement of operations would also hinge on the availability of aircraft. "We hope to commence our US operations by the year-end. If not, we may kick off the operations next year," he said.
Our Delhi Bureau reports: Earlier in the day, the air was thick with speculation that the mega merger deal was practically off since reports came in that Mr Naresh Goyal was closeted with lawyers and some senior board members of Jet, just four days before expiry of the 65-day deadline for the acquisition to be completed. The agreement, signed on January 19, envisages Air Sahara's entire aviation business, including some aircraft leases, real estate and assets such as auxiliary power units and engines, being acquired by Jet Airways.
Fuelling the speculation were other uncertainties. For instance, it is still not clear whether the Government would hand over all of Sahara's landing and parking slots to Jet. Second, the Minister for Civil Aviation, Mr Praful Patel, had informed Parliament last week that the Government had not received any request from the airlines for the buy-out, although the Ministry of Company Affairs had cleared Jet's proposal for the merger.
No application to Govt
Adding to the confusion was an official note issued by Jet Airways on March 17 that it regretted the statements made by one of its senior Executives on pending government approvals and re-negotiation of the Agreement between Jet Airways and Air Sahara. The airline clarified that it had not made any application to the Government for the merger.
The company's statement came in response to comments made by its Chief Financial Official, Mr Carl Saldanha, the previous day that the merger proposal would be cleared by the Government soon.
Moreover, Jet Airways officials had informally told the media on many occasions that if they were not getting the landing and parking rights of Air Sahara, the deal would be a "bad buy" and it would be better to cut losses by getting out of the agreement.
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