Sebi cloud on Etihad open offer waiver for Jet shareholders

The Securities and Exchange Board of India (Sebi) has expressed reservations over granting exemption to Etihad Airways in connection with an open offer to the minority shareholders of Jet Airways, sources in the know said. Exemption for making an open offer was among the key conditions set by Etihad to offer a lifeline to the debt-laden domestic carrier.

“During an informal discussion with lenders and other stakeholders, the regulator has said that such an exemption is against Sebi’s takeover norms and might not be favourable for the minority shareholders of the airline,” said a regulatory official privy to the development.

The Sebi stance comes at a time when the stakeholders concerned along with the lenders have informally sought the regulator’s views on the possibility of a waiver.

“The exemption is allowed only if the company is in distress and has undergone insolvency,’’ the official said.

Also, if the nodal ministry (civil aviation ministry in this case) intervenes and requests for the exemption, it could be considered, especially if the company has been tagged sick under the various bankruptcy provisions and the said exemption is in the interests of the small investors, he pointed out.

Etihad may formally seek regulatory approval for the exemption after the deal, it is learnt.

When contacted, Etihad said it does not comment on rumours or speculation. According to Sebi’s takeover code, a change in control at a listed company triggers an open offer to purchase an additional 26 per cent stake. “The integrity of the market regulator needs to be protected. If it allows such exemption in every case, it will lose sanctity and objectivity. This will also not give an opportunity to the minority shareholders to exit the company at an open offer price, said Shriram Subramanian, managing director, InGovern, a proxy firm.

Jet Airways’ next board meeting, scheduled for February 14, may announce the Memorandum of Understanding (MoU) with Etihad and also spell out the terms and conditions of the deal after discussing the legalities with the board members, said another person in know.

As per the proposed deal, founder chairman Goyal will step down from the board of directors and relinquish his decision making powers. His stake in the company could come down to around 22 per cent from 51 per cent now. Goyal’s son Nivaan Goyal will get a board seat.

The final agreement is expected to push up Etihad Airways’ stake to around 40 per cent from the current 24 per cent. The legal formalities around the deal and the way ahead could be decided at the Jet board meeting this Thursday, to be followed by an extraordinary general meeting (EGM) scheduled for February 21.