Etihad Airways rejects obligation to make open offer for Jet minority shareholders The Rs 2,060- crore Jet Airways-Etihad deal has run into rough weather with the Abu Dhabi airline rejecting any obligation to make an open offer for minority shareholders of the Indian carrier. According to sources, the Securities and Exchange Board of India (Sebi) is now seeking further clarity on the issue from the Competition Commission of India (CCI), finance ministry and civil aviation ministry. In reply to the Sebi notice in February, Etihad stated that it is not liable to make an open offer for the public holding in Jet as there has been no violation of the takeover code. Etihads main contention is that the deal was cleared by both Sebi and CCI before it was served the notice. Etihad has to reply to the notice within 21 days failing which it could be asked to make an open offer. According to sources, if Etihad fails to convince Sebi, it will have to make an open offer to buy the entire 25 per cent public holding in Jet as per Indias takeover rules. This would mean trouble for the Abu Dhabi airline. While Sebi had earlier stated that an open offer might not be required if Etihad is classified as a public shareholder after buying Jets 24- per cent stake, the market regulator had put a rider stating that the approval was subject to getting a clearance from other regulatory authorities that no transfer of control had taken place in the deal. While clearing the deal, CCI observed that Etihad was getting significant rights and joint control in running Jet and this has opened the window for Sebi to step in again. The two carriers later petitioned CCI to remove this observation, but the plea was rejected. 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 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. In the event such regulatory agencies decide that Ethihad 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 six per cent of the post allotment shareholding by the current promoter Group of Jet is made prior to the preferential allotment to Etihad.
Posted on: Wed, 12 Mar 2014 05:29:21 +0000
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