Naresh Goel gets shareholders' nod for Etihad deal
24 May 2013
Shareholders of Jet Airways today approved the sale of a 24 per cent stake in the airline to Abu Dhabi-based Etihad, which, chairman Naresh Goyal said, would improve the Indian carrier's profitability and lower costs.
Etihad is acquiring 24 per cent stake in Jet Airways for about Rs2,058 crore in the first-ever acquisition by a foreign airline in an Indian carrier after the government amended FDI rules in September last to allow up to 49 per cent foreign holding in an India carrier.
"Etihad investment will help us to deleverage and grow in a sustainable manner," Goyal said while addressing shareholders at an extra ordinary general meeting (EGM) convened to seek their approval for the deal with Etihad.
The EGM approved the proposed issue of preferential shares to Etihad amidst a review of the transaction by market regulators Securities and Exchange Board of India and the Competition Commission of India.
Jet Airways, however, deferred seeking shareholder approval for an amended "articles of association" as regulators have sought more clarity on the deal.
The resolution to amend the articles of association would be taken up after getting necessary regulatory approvals for the deal, Goel said.
Allotment of shares of Etihad would be made only after both regulators approve the deal.
"The commercial agreement with Etihad will help us to expand network, reduce costs and increase profitability," Goel told shareholders.
Jet Airways has so far only sold 24 per cent stake to Etihad and both companies also insist that substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive chairman.
The proposed modifications to the articles of association would reflect shareholders' agreement between its promoters and Etihad.
"Further, provisions have been added in the articles of association to further improve the standards of corporate governance of the company," it had earlier said.
These amendments included Etihad-nominated directors on Jet board not being liable for any default or failure of the company in complying with the provisions of any applicable laws.
"The investor (Etihad) board members shall not be identified as "officer in default" of the company or occupiers of any premises used by the company under laws," Jet had said in its EGM notice.
Pursuant to the deal, Naresh Goyal-led promoter group can nominate four directors (who would be Indian citizens), while Etihad would nominate three directors. The independent directors would be in addition to the seven nominee directors.
The amendments would also bar promoters from transferring any shares without a prior written consent of Etihad. Etihad would also be getting powers to appoint auditors.
In effect, the Abu Dhabi carrier would jointly control operations of the Indian carrier along with its current6 promoter.