The Sahara group on Thursday took effective control of Air Sahara after Jet Airways' Rs2,300-crore acquision bid collapsed yesterday, more than five months after the deal was announced. Air Sahara started operations on its own from most major airports in the country today, airline sources said.
There was no formal announcement from Jet Airways after a one-line communiqué to the media, yesterday stating, "Jet Airways wishes to clarify that it is still awaiting all the regulatory approvals and the fulfillment of all conditions precedent."
While Air Sahara filed a caveat in the Lucknow Bench of the Allahabad High Court to guard against any ex-parte hearing or order in the case, Jet said it is appearing before the Lucknow district court as the lower court is hearing the case now.
Top brass of the two airlines is engaged in legal consultations to deal with the cases filed in Mumbai and Lucknow courts and to minimise damage.
The Rs2,300 crore ($500-million) deal, once materialised, would have created India's largest airline, combining Jet's 35-per cent market share and Sahara's nine per cent. But it fell through due to a combination of procedural delays and disagreements between the two airlines.
The immediate trigger for the collapse of the deal was the government's failure to give Jet Airways chief Naresh Goyal security clearance to join the board of Air Sahara. The directorate general of civil aviation had granted clearance to four other directors of Jet Airways to join Sahara's board.
Government approval is mandatory for all appointments to the boards of airlines and telecommunication services companies, considered of strategic interest, after they were opened to foreign investment.
Sahara had also sought a 15-day extension of the deadline for completing deal but ruled out renegotiating the price, which Jet wanted to be reduced by 10-20 per cent.
Reports also suggested that Jet was using the delay in regulatory clearances as a negotiating tactic to reduce the acquisition cost that it had agreed to initially and which is being said to be overpriced.
The end of the deal was signalled by the two companies approaching courts in Lucknow and Mumbai seeking to restrain each other from withdrawing money deposited in the escrow account opened with ICICI Bank.
Sahara had secured an interim order restraining Jet from accessing the escrow account opened with ICICI Bank from a Lucknow court when the deadline for share purchase agreement expires. Jet too had filed an arbitration petition before the Bombay High Court seeking similar restraint on Sahara.
Jet's share price rose sharply on Wednesday as investors expected the deal to crumble. Analysts also said the price Jet agreed to pay for the deal was too high.