Jet, Sahara seal deal, finally

Tribunal's nod for Rs 1,450cr merger; Jet to make staggered payments stretching till 2011.

Settling its ten-month-old dispute, Jet Airways has agreed to buy out Air Sahara for Rs 1,450 crore. The three-member tribunal headed by British judge Lord Stein today approved the proposal by the two airlines.

The terms of the deal, signed at 1.20 pm today, were announced at two separate press conferences in Mumbai and New Delhi by Naresh Goyal of Jet Airways and Alok Sharma, president of Air Sahara, respectively.

Jet Airways has already paid Rs 500 crore as a deposit to Air Sahara which, in turn, has accepted a generously staggered payment schedule stretching till 2011. Jet will pay only Rs 400 crore on or before April 20. The remaining Rs 550 crore will be paid in interest-free equal instalments (Rs 137.50 crore each) from March 30, 2008, to 2011.

Taking the savings on interest (at existing rates), the net present value of what Jet will pay is Rs 1,200 crore. After the deal was signed, Naresh Goyal, chairman of Jet, said, "We have got the airline for 40 per cent less than the original price offered in January 2006."

At a hurriedly-convened press conference in Delhi, Alok Sharma said the deal had been finalised at an enterprise value of Rs 2,000 crore.

Sources close to the deal say the enterprise value was derived after including around Rs 550 crore in adjustments which includes the cost of four helicopters and immovable property that will be returned to the Sahara promoters, an investment of Rs 180 crore made by Jet to run the airline, and other interest payments that it had made.

They say Jet has paid only Rs 300 crore less than what it had promised in January 2006, when the deal was first signed.

Sharma, however, refused to offer details, merely saying, "It has been a win-win situation for both of us and the agreement has been signed on an as-is-where-is basis."

He also said that no fresh government clearances would be required since permissions, which include clearing Goyal's name for chairmanship, had already been granted.

In response to Goyal's statement, the Jet Airways scrip "" which was hammered down yesterday "" registered a sharp rise of 3.24 per cent to Rs 628.65 on the Bombay Stock Exchange (BSE), against the previous day's close of Rs 608.90.

Sources say the lease of at least five aircraft with Air Sahara ends within a month and as many as three of the CRJ small jets and three Boeings are grounded. They also say that Jet has to pay back the Rs 30 crore advance that Air Sahara had paid for booking ten Boeings, which will now be paid by the new owners.

Sahara's 3,700 employees had the option to be absorbed by Jet or Sahara. The Air Sahara brand would be used for a limited period, after which it will go back to the promoters.

Asked about funding the acquisition or retaining the Air Sahara brand, Goyal pointed out that a non-disclosure agreement was part of the deal with Air Sahara, adding, "we will be able to tell you the details by April 16," the day Jet will announce its revamped international product with new livery and uniform.

The airline has been under financial strain, making a loss of Rs 60.07 crore in the nine-month period ending December 31, 2006, against a net profit of Rs 224.92 crore in the corresponding year-ago period.