Etihad meets SEBI on ‘control’

To understand the regulator’s concerns on control and substantive stake in the Jet-Etihad deal, Etihad has met the SEBI twice on the issue, according to sources.

Jet’s EGM notice said the 24 per cent preferential allotment to Etihad will not result in a change in the control of the company. Etihad had the right to appoint three directors on Jet’s board.

SEBI sources, who spoke to

Business Line on the condition of anonymity, said the shareholder agreement between Jet and Etihad could have been binding on four points — joint rights of shareholders, veto rights, the ability of the acquirer (in this case Etihad) to appoint key managerial personnel (CEO/CFO), and committee members appointed by the board such as compensation and audit panels. .

Sources said SEBI has given Jet and Etihad the option of amending the shareholder agreement so as to retain only clauses that come with their voting rights. Jet and Etihad did not respond to emailed queries on the issue.

It is learnt that SEBI told the two companies that the deal clearly showed control in favour of Etihad. Further, the sources said, SEBI told the companies that it could exercise its discretion and direct Etihad to make an open offer.

This would mean buying a minimum of 26 per cent in addition to the 24 per cent that Etihad has committed to buy. This apparently would upset the commercials of the deal and also breach the FDI cap, added the sources.

CONTROL ISSUE

SEBI’s takeover regulations state that ‘control’ is the ability to influence appointment of directors and the management or policy decisions, though Etihad may not have majority voting rights.

Interestingly, in the new scheme of things, Naresh Goyal will be the Non-Executive Chairman with 51 per cent holding, going by Jet’s stock exchange filing of April 24, 2013.

raghavendrarao.k@thehindu.co.in

nivedita.ganguly@thehindu.co.in