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Adani Group to acquire GVK ADL debt, other investors’ stake for controlling interest in Mumbai airport

GVK Airport Developers owns a 50.5 percent stake in MIAL. The deal will allow Adani Group to convert the acquired debt into equity in GVK ADL. Investors Bidvest and Airports Company of South Africa together hold a 23.5 percent stake in MIAL.

September 01, 2020 / 03:48 PM IST

Adani Airport Holdings (AAHL), the Adani Group’s holding company for its airports business, is acquiring a controlling stake in Mumbai International Airport (MIAL). It will take on current owner GVK Airport Developers Limited’s debt, and also acquire Bidvest and Airports Company of South Africa’s stakes in MIAL for the controlling interest.

This will allow “Adani Group to convert the acquired debt to equity of GVKADL on mutually agreed terms, subject to obtaining necessary regulatory approvals."

GVK ADL is the holding company through which GVK Group holds 50.50% equity stake in Mumbai International Airport Limited, which in turn holds 74% equity stake in Navi Mumbai International Airport Limited (NMIAL).”

Bidvest and Airports Company of South Africa together hold a 23.5 percent stake in MIAL. 

GVK statement

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“The aviation industry has been severely impacted by COVID-19, setting it back by many years and has impacted the financials of Mumbai International Airport Limited. It was therefore important that we bring in a financially strong investor in the shortest possible time to improve the financial position of MIAL, as well as to help achieve Financial Closure of the Navi Mumbai International Airport project, which is a project of national importance. It is under these circumstances that we agreed to cooperate with Adani so as to achieve these twin objectives,” GVK Reddy, founder and Chairman, GVK said in a statement.

Separately, in a filing with exchanges today, GVK said it has terminated its agreement with Abu Dhabi Investment Authority (ADIA), National Investment and Infrastructure Fund (NIIF) and Canada's PSP Investments, signed last year, for its airports business. Recent reports indicate a consortium led by ADIA, NIIF, PSP Investments had served a legal notice on the GVK group saying the stake sale in MIAL to the Adani group would be a breach of their agreement.

Adani gets control of both MIAL and NMIAL

In a statement to the BSE, Adani Enterprises said: “The Adani Group will also take steps to complete the acquisition of a 23.5 percent equity stake from ACSA and Bidvest in MIAL for which it has obtained CCI approval.” This will give it a controlling interest in MIAL.

GVK Airport Developers, a subsidiary of GVK Group, owns a 50.5 percent stake in MIAL. Bidvest and Airports Company of South Africa (ACSA) own 13.5 percent and 10 percent of MIAL, respectively.

MIAL, which manages the Mumbai International Airport, will operate the upcoming Navi Mumbai International Airport as well.

GVK Group and AAHL, a unit of Adani Enterprises, have agreed that AAHL will offer a stand-still to GVK.

A standstill agreement is a form of anti-takeover measure where a violation can effectively stall or stop the process of a hostile takeover if the parties cannot negotiate a friendly deal, as per a definition by Investopedia.

“The GVK Group and AAHL have agreed that AAHL will offer a stand-still to GVK, in addition to release of the guarantee given by GVK Power and Infrastructure Limited with respect to the debt acquired by it,” Adani Enterprises said in a statement.

“AAHL intends to infuse funds into MIAL to ensure that MIAL receives much needed liquidity and also achieves financial closure of Navi Mumbai International Airport to be able to commence construction,” Adani Enterprises said.

The Adani Group has already received permission to operate the Lucknow, Jaipur, Guwahati, Ahmedabad, Thiruvananthapuram, and Mangaluru airports through the public-private partnership (PPP) model.

Deal contours

The valuations and financial terms of the deal were not disclosed, but, elaborating on its contours, GVK Power & Infrastructure said the terms of cooperation include:

  1. Acquisition of debt by Adani from various GVK lenders, including a Goldman Sachs-led consortium and HDFC.

  2. GVK to be released from various obligations, securities and corporate guarantees given in respect of the debt to be acquired by Adani.

  3. Adani to have option of converting the acquired debt to equity in GVKADL, on mutually agreed terms, subject to obtaining necessary regulatory approvals.

  4. Infusion of funds by Adani into MIAL to provide liquidity.

  5. Adani to achieve financial closure of Navi Mumbai International Airport project at the earliest in order to commence construction. 

Legal notice

According to recent media reports, a consortium of foreign investors, led by the UAE’s sovereign fund ADIA, India’s sovereign fund NIIF, and Canada’s Public Sector Pension Investments had served a legal notice on the GVK group, saying the stake sale in MIAL to the Adani group would be a breach of the agreement they had signed last year.

GVK clarified the reasons for termination of the deal with the foreign investors’ consortium in its filing to the exchanges today, citing a deadline for resolution with lenders, among other factors.

“Separately, GVK has notified the Abu Dhabi Investment Authority, National Investment and Infrastructure Fund and PSP, collectively, that the transaction documents stand terminated, as it is no longer effective and implementable. The reason for this decision was a) the terms of the transaction envisaged in the Transaction Documents were not implementable and b) the alternative proposals discussed would not provide a resolution to the lenders of ADL by the end of August, which was a requirement of our lenders,” the firm said.

 
Moneycontrol News
first published: Aug 31, 2020 09:30 am
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