TOI was also the first to report that Tata Sons chairman N Chandrasekaran had called a meeting on Friday to seek the group holding company’s backing for the acquisition—but if he was hoping for a speedy nod, that wasn’t forthcoming with two prominent directors expressing some reservation about betting big money on a loss-laden, debt-ridden airline that may need upwards of $2 billion to be flying-fit again.
After a six-and-a-half-hour-long inconclusive board meeting—at which Chandrasekaran was to present a business viability plan—Tata Sons issued a statement that it was yet to make a “proposal” to Jet Airways.
But a deal is still very much on the table, just that it might need “further due diligence” and “some more sweating of the details,” according to a few people close to the situation.
All eyes in the group are on Ratan Tata, chairman of Tata Trusts, which is a two-thirds shareholder in the holding company. His blessings are said to be critical to the acquisition going ahead. Tata has always had an abiding interest in the aviation business, and was reported to be keen on the Tatas bidding for Air India when the government, unsuccessfully, put it on the block earlier this year. Whether he shares the enthusiasm of some others about Jet is not clear.
Fearing competition, Goyal is widely thought to be have waged a subterranean campaign against Tatas’ attempts to re-enter aviation in alliance with Singapore Alliance back in the 1990s and early 2000s. It was only in 2013 that the group, which owned Air India till it was nationalized in 1953, was finally back in Indian skies, with a joint venture with SIA for full-service Vistara, and another with Air Asia for a budget carrier.
Chandrasekaran, who was not keen on acquiring Air India—primarily due to some of the conditions for the divestment—has spearheaded the deal talks with Jet in the belief that the acquisition would help the Tatas build scale in the aviation business, and transform it from being a fringe to a dominant player. As reported by TOI on November 15, the deal would give the group a combined market share of 24% in the country. Jet, with a fleet of 124 aircraft, has a domestic market share of 16% and around 14% on international routes. Air Asia India and the 22-fleet Vistara have market shares of about 4% each in the country; neither operates internationally. The transaction would also give the Tatas a large network as well as slots at busy airports around the world.
According to Tata Sons’ Articles of Association, a crucial acquisition proposal like Jet or investments entailing more than Rs 500 crore, requires the majority support of the nominee directors of Tata Trusts. At the moment, there is only one Trusts nominee on the board of Tata Sons—Amit Chandra, MD of Bain Capital—after Vijay Singh and Nitin Nohria stepped down. Besides Chandra and Chandrasekaran, the board has five external members—including two industrialists, Ajay Piramal and Venu Srinivasan—and three Tata executives.
Jet Airways, in which Goyal with 51% and Abu Dhabi's Etihad with 24% are the significant shareholders, is staring at financial defaults in the coming days. Shares of Jet Airways ended Rs 347 on the BSE, closing at a four-month high just before Tata Sons issued its statement.
While Friday’s board meeting may have a sobering effect on deal-makers at Bombay House, it carries bigger worries for Goyal and his airline. Jet has delayed salaries and defaulted on vendor payments and some of its leased aircraft may be in danger of being repossessed. American buyout investor TPG remains in the fray but it has concerns about control issues since Indian regulations limit foreign ownership to 49%. Delta Airlines had explored investing in a combination of Jet and Air India earlier this year, but quickly abandoned the idea, said bankers familiar with the developments.
from Times of India https://ift.tt/2OLstHd
