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Etihad-Jet deal likely by Friday

Publication Date : 23-01-2013

 

A US$330 million foreign direct investment (FDI) deal between Abu Dhabi's Etihad Airways which is expected to buy up to 24 per cent stake in the country's biggest private carrier Jet Airways is expected to be announced by Friday, according to market sources.

The two airlines involved in negotiations have so far withheld their comments. By clinching the deal through confidential talks, Jet Airways pipped its erstwhile rival--now completely grounded--Kingfisher Airlines to the post. Both have been in race to be the first to make maximum of the government policy declaration on September 2012 permitting up to 49 per cent FDI in the aviation sector.

Reports say, Etihad is satisfied with Jet valuation at 6,700 crore rupees which is 15 to 20 per cent more than Jet Airways' current market capital. On Tuesday it was 5,265.08 crore rupees after the Jet share closed 0.71 per cent up at Rs 609.85 on the Bombay Stock Exchange (high Rs 623.40) and 0.75 per cent up at 609.90 rupees (day's high Rs 623.65) on the National Stock Exchange. (One crore is equivalent to 10 million.)

Valuation has been the main point of contention in the talks besides high airport and fuel duties in India which often deter foreign airlines from entering into an agreement with their counterparts here. Jet Airways chairman Naresh Goyal holds about 80 per cent stake in the company via Tail-Winds a company registered in tax haven Isle of Man.

Since the holding company in Jet is off-shore based, Jet will have to seek special clearance from the financial regulators and the government to sign the FDI deal with Etihad Airways. Industry sources say Goyal will continue to be the chairman of the company even after the sale of up to 24 per cent shares to Etihad. The Gulf's well-know airlines is expected to get a couple of seats on Jet's board of directors.
Etihad and Jet already have a code-sharing agreement. An FDI deal, experts say, would make Jet more competitive since with the help of Etihad it can spread its wings further on several busy routes in West Asia. The rise will be a challenge to state-run national carrier Air India.

 

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