Sahara confirms that workers will not lose their jobs and cadres
NEW DELHI: The biggest deal in the Indian civil aviation history was announced on Thursday with Jet Airways taking over Air Sahara for nearly $500 million (about Rs. 2,300 crore) in an-all cash deal, executed on late Wednesday night.
Announcing the deal through a joint statement, Jet Airways Chairman Naresh Goyal and Sahara group Chairman and Managing Worker Subrata Roy said they were "pleased to announce the execution of a share purchase agreement for acquisition by Jet Airways India Limited of the entire capital of Sahara Airlines Limited subject to regulatory approvals.''
Lease to end in 2010
"Sahara India confirms that workers shall not lose their jobs and cadres and the gross emoluments will be unaffected. Upon closure of the transaction, based on the requirements and performance, Jet Airways shall absorb suitable employees,'' according to the statement.
Though talks between the two leading private carriers on the subject had been in the air for the last few months, they preferred to term the exercise as discussions on forging a "strategic alliance.'' Shedding its initial coyness and shying away from the talk of buying out Air Sahara, Jet Airways stepped on the gas after Kingfisher Airlines chief Vijay Mallya gave up his efforts, saying $500 million was too high a price. At present, the public sector carrier Indian Airline's market share is estimated to be around 34 per cent, Jet's share at 37 per cent and Air Sahara's is put at 12 per cent.
Addressing a press conference, Air Sahara Vice President Alok Sharma said that Air Sahara's equity value was put at about Rs. 276 crore. Mr. Sharma said there was no timetable set for a total integration as there were a number of processes to be undergone, including approvals and clearances from various government authorities. He said all the 27 aircraft of Air Sahara were on lease but other tangible assets like ground equipment, engines, spares and other inventories would be transferred to Jet Airways. The lease of Air Sahara aircraft was likely to end by 2010 and two new leased aircraft would arrive in February and March.
Sahara group Chairman Subrata Roy, in an internal communication to Air Sahara employees, numbering about 4,400, assured them full job protection. "If the employees find it difficult to work under the new management, the Sahara India Pariwar, in a true family spirit, shall be responsive to any of their genuine difficulties and would take all steps to mitigate their difficulties,'' Mr. Roy said.
Reacting to the acquisition, highly placed sources in the Civil Aviation Ministry said, "Since both are private companies, laws of the land, relating to acquisitions and mergers, will apply to their case. The Department of Company Affairs and the Securities and Exchange Board of India (SEBI) may have a role to play,'' the sources pointed out.
At stake would be two crucial factors - the allocation of parking bays and the arrival and departure slots during the prime time in morning and evening in the four metros - that would favour Jet Airways after the new, rebranded entity comes into existence.
The DGCA and the Civil Aviation Ministry would also need to look at the bilateral rights given to both private carriers individually for international flights. Aviation industry experts pointed to mergers and acquisitions on the global aviation scene and recalled that the proposed merger of American and British Airways was grounded in 2001 on the question of slots at the London Heathrow airport as the regulating authorities ruled that the combine could not control the slots and would be required to release the existing slots in favour of the competitors.
Mumbai Special Correspondent writes: "We will utilise our internal accruals to fund the acquisition of Sahara Airlines,'' said Saroj Datta, Executive Director, Jet Airways, here on Thursday. Talking to The Hindu, Mr. Datta said the share purchase agreement for acquisition had been executed for an all-inclusive enterprise value of around $500 million.
The transaction was for an all cash consideration. However, the deal did not include the liabilities of Sahara Airlines Ltd.
The deal, which was jointly executed on Wednesday, was approved by the Board of Jet Airways India Ltd., in Mumbai.