Jet-Etihad deal: Agencies in consultation on 'control' issue

As Jet-Etihad deal continues to face regulatory hurdles, the government and market regulator Sebi today said consultations are underway between various agencies on whether the deal amounts to transfer of 'control' in the Indian carrier to foreign hands

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Naresh Goyal-led Jet announced in April that it wishes to sell 24 per cent stake in the company to Abu Dhabi-based Etihad Airways in a deal valued at over Rs 2,000 crore.
But certain clauses of the proposed transaction hit the regulatory hurdles as they were seen to be giving the foreign carrier voting rights and other powers in excess of their shareholding.

Concerns have also been raised that the deal could amount to Etihad getting 'control' of the company with even 24 per cent stake.

"The definition of control is there. In our point of view, it is (about) whether it will trigger an open offer or not... Various agencies are on board and are in engaged in consultations regarding this," Sebi Chairman U K Sinha said here at an investor awareness programme.

He was replying to queries on whether there was a difference of opinion among various government departments and regulatory agencies on definition of 'control' in the context of Jet-Etihad deal.

Speaking at the same function, Corporate Affairs Minister Sachin Pilot said that the consultations were underway on what 'control' would mean in the present case.

The Minister said the Sebi has a definition of 'control' in the context of takeover regulations, while new Companies Bill also provides a definition.

"There are no differences (between agencies) but we want a definite meaning of what control means and whether it is about the number of shares held by promoters to something else," the minister said.

Among others, the deal needs to be cleared by Sebi for takeover regulations, by Competition Commission of India (CCI) for fair trade norms and by FIPB (Foreign Investment Promotion Board) for FDI-related rules. The FIPB is expected to take up the matter on July 29 for further consideration.

FIPB had earlier sought views from Sebi and the Ministry of Corporate Affairs on the definition of 'control' to be applied in the present case.

As per Sebi, an acquirer can get control of a target company even with the purchase of a minority stake in absolute terms provided it gets powers like greater voting rights and a larger say on appointment of directors etc.

Sebi rules require an acquirer, buying 25 per cent or more stake in a listed firm, to make a mandatory open offer for purchase of further 26 per cent stake from public investors.

However, takeover regulations for making a mandatory open offer would also apply to any entity buying stake of less than 25 per cent if it is getting 'control' of the target entity.