Tatas to insist on non-compete for Goyal
This could prohibit Goyal from not only running an airline but also staying away from the travel business for five years
Tata Sons is likely to seek a strict non-compete agreement from Jet Airways promoter Naresh Goyal as the conglomerate explores buying out Goyal’s stake in the airline.
Tata Sons is likely to seek a strict non-compete agreement with Jet Airways’ promoter Naresh Goyal as the conglomerate explores buying out his stake in the airline.
Sources said the non-compete agreement would prohibit Goyal from not only running an airline but even staying out of the travel and trade business for at least five years.
This would mean that the 69-year-old industry veteran, who started his career from being an India agent for foreign airlines, will have to step away from the business.
However, such a clause may become a deal breaker as sources say Goyal will not want to be shunned out of the travel business.
Non-compete agreements are frequently used in merger or acquisition transactions. These pacts are usually made a part of the deal to ensure attainment of the desired results from the merger or acquisition transaction.
“The Tatas are likely to insist on heavy non-compete clause with no travel-related business participation. This will be insisted along with noboard presence of Goyal or his family members. Goyal may not agree to some of the clauses,” said a person aware of the developments.
With travel agency Jetair (Pvt) Ltd, Goyal began as a general sales agent (GSA) for the obscure Lebanese International Airlines. The company later expanded business and provided sales and marketing representation to several foreign airlines in India. The agency was also involved in studying routes, traffic, flight scheduling and operational economics for foreign airlines. This helped him win clients likes of Air France, Austrian Airlines and Cathay Pacific.
According to sources, the Tatas may agree to buy out the entire 51 per cent stake of Goyal. But the group does not want Goyal or his representatives to remain on the board after acquisition. At present, both Goyal and his wife Anita are both on Jet Airways board.
Sources said he was exploring opportunities for talks with various US-based stressed funds, including WL Ross and Co, the private equity firm controlled by billionaire investor Wilbur Ross. The company didn’t respond to queries sent by Business Standard.
Ross had earlier picked up 30 per cent stake in SpiceJet during its financial distress and later sold out for $127 million in a deal that allowed him to cash out of the airline with a profit.
“Goyal is exploring other options where it can be a onetime capital infusion without giving up substantial control. Many foreign airlines and private equity funds have been sounded out for picking a stake in the airline without taking management control,” the person said.
An investment banker said foreign funds scouring for distressed assets will find Jet Airways a good opportunity as valuation of the company is at its lowest. “Ideally, if I am a fund willing to invest in the distressed sector, betting on Jet Airways is a possible thing as it would come cheap and with a chance of a turnaround,” he said.
The Tata group wants to merge the airline with its existing full service carrier Vistara, which will give it a meaningful market share. Such an acquisition would help the group be in sync with Tata group chairman N Chandrasekaran’s objective of becoming a market leader across businesses.