Shareholders of Jet Airways approved the 24 per cent stake-sale in the airline to Abu Dhabi-based Etihad Airways on Friday.
Forging a strategic alliance, Jet Airways has decided to sell 24 per cent stake to Etihad Airways on a preferential basis for Rs 2,058 crore. The shares will be allotted after receiving regulatory approvals.
Addressing Jet Airway's shareholders at an Extraordinary General Meeting convened to seek their approval for the Etihad deal, Chairman Naresh Goyal said the strategic alliance with Etihad Airways will help Jet expand its network, reduce costs and increase profitability.
Goyal said the company will announce an offer-for-sale by May 30 to meet the SEBI’s minimum public shareholding norm of 25 per cent.
The company, however, deferred seeking shareholder approval to amend its ‘Articles of Association’ (AoA).
Goyal said the resolution to amend the AoA will be taken up after getting regulatory approvals for the deal. Etihad’s investment is the first by an overseas carrier in an Indian airline since ownership rules were relaxed.
Goyal to hold 51%
Both, Etihad and Jet Airways have said that substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive Chairman holding 51 per cent stake.
Post the deal, Naresh Goyal-led promoter group can nominate four directors, while Etihad would nominate three directors.
In an earlier filing to BSE, Jet Airways had said it was proposing to modify the existing AoA to reflect the shareholders’ agreement between its promoters and Etihad.
“Further, provisions have been added in the Articles of Association to improve the standards of corporate governance of the company,” it had said.
These amendments included Etihad-nominated directors on Jet board not being liable for any default or failure of the company in complying with the provisions of any applicable laws.
Advisory’s suggestion
Earlier, proxy advisory firm Stakeholder Empowerment Services (SES) had criticised Jet Airways’ proposal to make amendments to AoA and said that it was not in compliance with good corporate governance practice.
SES’s founder J.N. Gupta is of the view that if the proposed amendment gets shareholders’ nod then Etihad will end up getting special privilege rights which will impact the equitable rights of all the shareholders.
He has thus suggested that the shareholders should vote against the move.