No violation in Jet deal, Etihad tells Sebi

Abu Dhabi-based airline says CCI's view on control different from that under takeover code

Abu Dhabi’s Etihad Airways has denied violating takeover rules while buying a 24 per cent stake in Naresh Goyal’s Jet Airways.

In a reply to the Securities and Exchange Board of India (Sebi), the foreign airline has said it is not liable to make an open offer for the public holding in Jet as there has been no violation of the takeover code.

Etihad’s main contention is the deal was cleared by both the securities market regulator and the Competition Commission of India  before it was served a notice by Sebi in February. The airline had to reply to the notice within 21 days, failing which it could be asked to make an open offer.
 

DEAL DETAILS

2013

• Apr 24: The board of Jet Airways approves 24% stake stale to Etihad at Rs 754.7 a share
• Sep 25: Sebi writes to DEA stating the revised deal doesn’t result in change of control and the two entities won’t be treated as PACs. If any other regulatory agency sees Etihad is acquiring control over Jet, Sebi will consider the entities as PACs
• Nov 12: CCI approves the Jet-Etihad deal, says it doesn’t raise concerns of adverse competition issues
• Nov 26: CCI also says Etihad gains ‘joint control’ through the deal

 2014

• Feb: Sebi issues show cause notice to Etihad for violation of takeover code regulations
• Mar: Etihad in its reply to Sebi denies violation of takeover code. Says CCI has made an observation purely from a competition law perspective

The Abu Dhabi-based airline, in its reply, is believed to have said the anti-trust watchdog--which observed that Etihad would get joint control in Jet Airways — had examined the deal purely from a competition law perspective and not through the prism of the Companies Act or the Sebi’s takeover code.

Sebi and Etihad did not respond to this newspaper’s queries on the matter.

Last December, Etihad and Jet Airways had appealed to the Competition Commission to review its observation but the plea was rejected.

In a communication to the ministry of finance in September, Sebi stated the agreement between Jet Airways and Etihad did not result in change of control. However, the market regulator had put in a caveat that if any other regulator took the view that Etihad was gaining control over Jet Airways, the two airlines would be deemed to be “persons acting in concert”.

Sebi’s notice might have been influenced by the Competition Commission’s observation on the deal. According to the takeover code, an open offer can be triggered if an entity acquires “control” over a listed company.

Jay Parikh, partner in Verus, a law firm, said, “The Competition Commission’s observation on ‘control’ does act as a catalyst for Sebi to review the implications of the Jet-Etihad deal under the takeover regulations. At the heart of the debate lies the issue of what should constitute ‘control’ from the perspective of securities law.”

“Control is a subjective issue. A fresh view has come Sebi's way. The regulator will definitely act on this,” said Pavan Kumar Vijay, managing director & founder, Corporate Professionals, a consultancy firm.