Commercial pact with Etihad not to override Jet Airways board powers’

Jet Airways has changed the shareholders agreement and investment agreement, as suggested by the FIPB

PTI

First Published: Wed, Sep 25 2013. 07 06 PM IST

The FIPB had approved a proposal for Abu Dhabi-based Etihad Airways to buy a 26% stake in Jet Airways for Rs2,058 crore with certain riders on 29 July. Photo: Abhijit Bhatlekar/Mint

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New Delhi: Jet Airways (India) Ltd. and Etihad Airways have submitted revised documents to the government seeking to allay the Foreign Investment Promotion Board’s (FIPB) concerns over control of their proposed venture, saying the commercial co-operation agreement (CCA) will not override powers vested with the company’s board.

“We confirm that the CCA will not undermine the powers of the board of the company at any time to enter/exit from such commercial arrangement,” according to a joint note submitted by Jet Airways and Etihad Airways to the department of economic affairs (DEA).

Naresh Goyal-led Jet Airways has also changed the shareholders agreement and amended the investment agreement and the articles of association, as suggested by the FIPB, headed by DEA secretary Arvind Mayaram, official sources said.

They said the cabinet committee on economic affairs (CCEA) could take up the deal for approval in the next few weeks. The CCEA will consider the proposal because the foreign investment involved is higher than Rs1,200 crore. Earlier, the FIPB said Securities and Exchange Board of India (Sebi) would ascertain if control rests with the Jet Airways board, as per the revised CCA.

The FIPB had approved a proposal for Abu Dhabi-based Etihad Airways to buy a 26% stake in Jet Airways for Rs2,058 crore with certain riders on 29 July. The riders include Jet Airways seeking the government approval before changing the shareholders agreement with Etihad and any arbitration to take place under Indian law, not English law as proposed earlier.

The two airlines agreed to reduce Etihad’s representation on the Jet Airways board to two from three, besides vesting Goyal, Jet’s founder-chairman, with the right to deliver a “casting vote on any matter.”

In the revised shareholders agreement, Etihad agreed to make only recommendations about suitable candidates for top positions in Jet Airways as opposed to getting the right to source senior management.

Under the original proposal, four directors were to be nominated by Jet and three by Etihad, besides seven independent directors of which at least six had to be Indian citizens. The revised proposal seeks to address concerns of the FIPB and market regulator Sebi with regard to ‘effective control’ after the foreign direct investment (FDI), which will be the largest in the aviation space. There will be no change in the shareholding pattern, with Etihad picking up 24%, key promoter Goyal holding 51% and 25% with others, including institutions and individuals.
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