The Hindu Business Line : Air Sahara in Jet Air fold for Rs 1,450 cr

THE FINAL PRINT: Mr Naresh Goyal (right), Chairman, Jet Airways, and Mr Saroj Datta, Executive Director, at the arbitration meeting of the merger agreement with Air Sahara in Mumbai on Thursday. — Paul Noronha

Mumbai/ New Delhi April 12 Air Sahara has finally landed on Jet Airways runway, ending nearly 10 months of dispute between the two airlines.

Billionaire Naresh Goyal-promoted Jet Airways on Thursday announced that it has agreed to buy out Air Sahara in an all-cash deal for Rs 1,450 crore, which is about 40 per cent less than the Rs 2,300 crore that Jet had agreed to pay for the acquisition in January 2006.

The two airlines, after two days of closed-door talks in a five-star hotel in Mumbai, submitted the re-worded sale purchase agreement to the three-member arbitrators panel. The delay in hammering out the consent order was on account of some differences between the two sides on payment procedures.

Emerging out of the meeting, Mr Goyal, Chairman of Jet Airways, and Mr Harish Salve, the airline's counsel, said the two airlines had resolved all disputes amicably.

Four instalments

While Rs 500 crore has already been paid to Sahara after the first agreement was inked between the two in January 2006, Jet will be paying another Rs 400 crore on or before April 20. The remaining Rs 550 crore will be paid in four equal annual and interest-free instalments during the next four years ending 2010-11 commencing on or before March 30, 2008.

Mr Goyal said at the current interest rate, the Net Preset Value of the lumpsum price was in the vicinity of Rs 1,200 crore.

He, however, did not touch upon the liabilities of Air Sahara including about Rs 200 crore credit outstanding. Sources said Jet would have to bear these liabilities, which would enhance its acquisition cost.

Asked when Jet will rename Sahara, and whether the airline would retrench any Air Sahara employees, Mr Goyal said he would answer all questions pertaining to the deal on April 16.

Jet had initially inked an agreement to buy out Air Sahara in January 2006 and had subsequently operated the smaller airline for about three months. However, Jet walked out of the deal in June last year, triggering off intense courtroom battles.

The buyout will make the merged entity the largest domestic private carrier, with a market share of about 42 per cent and a fleet of 88 aircraft, including the 27 operated by Air Sahara.

Incidentally, all the Sahara aircraft are on lease.

The buyout will also help Jet in its plans to go international.

The company plans to increase its revenue from international operations to 50 per cent of the total earnings within the next three years. The company has applied for rights to expand its international network to connect India to key destinations across the world, including the US, Canada, the UK, South Africa, Kenya, China and South East Asia.

Beneficial to both

Briefing newspersons in New Delhi, the Air Sahara President, Mr Alok Sharma, said the deal has been closed on an as-is-where-is basis.

"The deal will see Jet Airways get Air Sahara in its current position. All the Government approvals for the deal are in. The deal is beneficial to all parties.

Not only will Jet Airways get to operate on our routes, it will also get the existing fleet and the 10 brand new Boeing 737 aircraft being delivered to us. Besides, Jet will also get a larger market share and more loyal customers," Mr Sharma said.

The deal allows the Air Sahara brand to continue for some more time after which it would revert to the owners of Sahara group.

While the airline president refused to reveal financial details of the transaction, sources indicated that the enterprise value for the deal had been pegged at Rs 1,950 crore, which includes Rs 680 crore already paid by Jet to Air Sahara and Rs 950 crore that remains to be paid.

Assets of Air Sahara including four helicopters and the personal Boeing Business Jet of the Sahara Group Chairman will be carved out and sold back to Sahara.

The completion of the deal will not affect the existing 3,700 Air Sahara staff. "If required, Sahara will absorb all employees at the same terms and conditions," Mr Sharma added. While Jet Airways is likely to absorb the pilots, cabin crew and engineers with Air Sahara, the rest of the staff are likely to be absorbed by the Sahara group, sources indicated.

Reacting to the development, the Jet Airways stock increased by 3.24 per cent to close at Rs 628.65 on the BSE on Thursday.