Jet-Etihad deal revived; differences may be ironed out

It looks like the Jet-Etihad deal is finally approaching closure after months of going back and forth. Both Jet and Etihad have finally agreed on several sticky issues of board and management control, and are working on ironing out remaining differences, reports CNBC-TV18's Kritika Saxena.

Also read: Favour AirAsia JV; no due diligence shortcuts: Ajit Singh The AirAsia-Tata venture may have stolen a march for now, but Etihad and Jet Airways might make an announcement of their own soon. As it was reported by CNBC-TV18, Etihad has been looking to pick up 24% in two tranches but the deal kept getting postponed due to several issues. However, now according to sources about 10-12% will be sold in the first tranche, directly by promoters of Jet Airways. In the second tranche, Etihad will subscribe to a preferential allotment of shares, after which it will hold 24% of the expanded equity. The deal value is likely to be between USD 300-350 million. Analysts say the issuance of fresh shares will help jet to partly retire its Rs 11,500 crore of debt. Commenting on the same SP tulsian of sptulsian.com says the infusion of the funds, which works out to be about Rs 1800 crore, will be coming into the company, and partly maybe going to promoters. He further added, if you break this 24% into two parts, maybe 10% to promoters and 14% into company, then the company will have an infusion of Rs 1100-1200 crore which will partly get used to retire debt, With regards to other contours of the deal, sources say while Jet Airways is willing to offer Etihad four board seats by expanding its board. The two firms are still negotiating the inclusion of the right to first refusal clause in the share purchase agreement as sought by Etihad. As per RoFR clause, Etihad is seeking the right to first refusal, if the promoters wish to partly or completely sell their stake at a later date. It will also give the carrier the option to hike stake, subject to the FDI limit of 49%. Etihad maynot get control over the operations of Jet Airways as per Indian regulatory norms. However, we learn from sources that the two players are working out an arrangement wherein Etihad will be able leverage its investment in Jet Airways for its overseas expansion plans and control some part of Jet Airways' international expansion plans by expanding the code sharing agreement that the two companies had signed in 2008.