The 2.73 crore shares represent a 24 per cent stake in Jet Airways' fully-diluted equity capital. At 24 per cent, the Abu Dhabi-based airline will not have to make the mandatory open offer for Jet. According to Sebi rules, a buyer acquiring a 25 per cent stake in a listed company will have to make an open offer to the shareholders of the target company, and the minimum stake that the acquirer can own after the open offer is 51 per cent. However, the government of India allows foreign airlines to own only up to a 49 per cent stake in Indian carriers.
At 754.74 per share, the offer price is a 31.55 per cent premium to Jet's closing price of Rs 573.85 on the Bombay Stock Exchange and of Rs 573 on the National Stock Exchange yesterday. Indian markets are closed today for a local holiday.
Mahantesh Sabarad of Fortune Equity Brokers told NDTV Profit that the premium is not unnatural since the deal involves a strategic stake and some amount of control and, therefore, warranted 'a control premium'.
The deal values all of Jet Airways at Rs 8,574 crore. It will give Etihad a bigger foothold in India, a fast-growing but challenging market, and provide Jet with cash to retire debt and give it a partner with global expertise. "It's a game-changing opportunity for Etihad, and a game-changing opportunity for India," Kapil Kaul, regional head of the Centre for Asia Pacific Aviation (CAPA), told Reuters. Jet will benefit from strategic expertise, cheap financing and possible fuel import benefits in addition to the capital injection, he added.
The deal is subject to regulatory and shareholder approval. Jet will convene an extraordinary general meeting to seek shareholder approval for the stake sale.
The deal has moved faster than expected, Mr Kaul told NDTV, adding that he does not foresee any hurdles to the deal from other airlines.
Shareholders of Jet will value the stock at Rs 610-640, higher than the current market price but substantially less than Etihad's Rs 754.74 apiece, Mr Sabarad said. The Jet Airways stock has risen 15 per cent since April 17.
The Jet Airways board has agreed to sell a stake to Abu Dhabi's Etihad Airways. This is the first deal in the Indian aviation space ever since the government last September relaxed ownership rules and allowed foreign airlines to buy up to a 49 per cent stake in Indian airlines.