The Rs.2,060-crore Jet-Etihad deal seems to have hit a fresh round of regulatory turbulence, with the Abu Dhabi carrier rejecting any obligation to make an open offer for minority shareholders of the Indian carrier.
While Etihad has told Securities and Exchange Board of India (SEBI) that it has not violated any securities law by not making an open offer, the capital market regulator is now seeking further clarity on the issue from other agencies including fair trade watchdog CCI, Finance Ministry and Aviation Ministry, sources said.
A query sent to Etihad and Jet regarding the issue remained unanswered.
While SEBI had earlier contended that an open offer might not be required if Etihad was classified as a ‘public shareholder’ after buying Jet’s 24 per cent stake, it had put a caveat saying this observation could change if some other regulator points out at transfer of control in this deal.
The deal, which was first announced about a year ago in April 2013, has already gone through several rounds of regulatory hurdles — mostly on differences of opinion about whether Etihad was getting full or joint control of Naresh Goyal-led Indian carrier.
The deal had to be restructured last year to address concerns raised by SEBI and Competition Commission of India (CCI), after which it got consummated late last year.
However, an observation made by the CCI has put the deal back under scanner. While clearing the deal, the CCI observed that Etihad was getting “significant rights” and “joint control” in running Jet Airways. The two carriers later petitioned CCI to remove this observation, but the plea was rejected.
Show-cause notice On the basis of this observation by CCI, SEBI later used its earlier caveat and 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 at Jet Airways by way of 24 per cent stake purchase.
In its reply to SEBI, submitted earlier this month, Etihad had contended that the deal was closed after all necessary regulatory clearances and it was not obliged to make any open offer.
Sources, however, said that the company should have formally petitioned for getting an exemption from making an open offer. Besides, SEBI was seeking further clarity from the CCI and other agencies on the issue of control.
While giving its earlier observation on the deal, SEBI had informed the Finance Ministry that its concerns were “by and large addressed” after certain changes were made in the deal.
However, SEBI put a caveat with respect to the commercial co-operation agreement between Jet and Etihad and said it “would be guided by the decision taken by the government or other regulatory agencies regarding change in management and control.”
In the event, such regulatory agencies decide that Etihad would be acquiring control over Jet, it would be deemed as a person acting in control along with the current promoter group of Jet, SEBI had informed the Finance Ministry in September 2013.
Further, in the interest of corporate governance and to ensure well dispersed public shareholding, SEBI had said it would be desirable that the disinvestment of 6 per cent of the post-allotment shareholding by the present promoter group of Jet was made prior to the preferential allotment to Etihad.
