Sahara rejects lower Jet offer

Air Sahara is believed to have rejected Jet Airways' attempt to lower the price it has to pay "" pegged at $500 million in the agreement signed in January this year "" for acquiring the airline.

Jet had been arguing that going by the valuation for rival airline Air Deccan, the January deal had drastically overvalued Sahara.

Air Sahara sources said the airline was willing to extend the deal deadline by another 15 days, but was not ready to lower the price.

Sources close to the development said Jet's argument was that Air Deccan, which owned more aircraft and a higher market share than Air Sahara, had been valued at about $200 million.

On the other hand, Jet has to pay $500 million for Air Sahara, whose entire fleet is leased and which flies fewer routes than Deccan.

A final decision in this regard will be taken in the next 24 hours, before the deadline for concluding the deal expires on the midnight of Wednesday. The board of Jet Airways is expected to meet tomorrow to finalise the course of action "" including lowering the bid price or a possible cancellation of the deal.

"Technically, there is no problem in Jet acquiring Air Sahara as it can extend the escrow account by another 45 days and go ahead by appointing another Jet executive in place of Goyal. But this dilly-dallying points at a possible renegotiation of Air Sahara's value," the sources said.

Naresh Goyal, chairman, Jet Airways, is personally heading the negotiations with Air Sahara. The Jet sources said Goyal had written to the Air Sahara management earlier this month, expressing unhappiness over the slow progress in integrating the two companies and getting the regulatory approvals.

Jet was also unhappy over a number of issues relating to the operations, management, and finances of Air Sahara, they said.

The deadline for the escrow account, which was extended by three months on March 23, expires tomorrow. Jet Airways had paid a further advance of Rs 500 crore to keep the deal on.

The home ministry has not cleared Goyal's appointment as the chairman of Air Sahara. Also, the Directorate General of Civil Aviation has not approved the deal or the transfer of Air Sahara's assets to Jet Airways.

The home ministry has convened a meeting tomorrow to discuss the security issues related to Goyal's induction into the Air Sahara board.

"Since the escrow account will expire tomorrow, the government has decided to take a final decision on the pending security clearance for the Jet chairman to be inducted into the Air Sahara board," said the sources.

Both Jet and Air Sahara executives refused to officially comment on the issue, saying they were legally bound not to make any announcement before the regulatory approvals came in.

"Jet Airways wishes to clarify that it is still awaiting all the regulatory approvals and the fulfillment of all conditions precedent," Jet said in a press release today.

The Jet stock closed at Rs 671.45 on the BSE today, 1.48 per cent higher than yesterday's close of Rs 661.50. The company had launched its initial public offering at Rs 1,100 a couple of years ago.