Jet buys peace with Sahara
Naresh Goyal to pay Rs 1,875 crore, airlines’ merger through report Lalatendu Mishra & Indulal PM.india Updated: Apr 11, 2007 02:12 IST
After months of legal battles and arbitration proceedings, Jet Airways is set to buy Air Sahara for a total valuation of Rs 1,875 crore.
Confirming the development, Jet Airways lawyer Janak Dwarkadas said: "Both the parties have reached an agreement. They will present the agreement before the tribunal and the arbitration tribunal will give the final verdict on Wednesday."
After calling off the deal in June last year, Jet Airways decided to revive it as the Naresh Goyal–controlled airline anticipated an adverse verdict from the arbitration panel headed by British judge Lord Stein.
The Bombay High Court, in September last year, had directed the warring airlines to resolve their issues through a tribunal. After Jet walked out of the deal, Sahara filed a petition in a Lucknow court against Goyal’s airline.
The aborted deal saw chances of revival 10 days ago when both parties began negotiating for settling out of court. Air Sahara insisted that Jet Airways had to pay Rs 1,350 crore to take over the company, sources said. “Jet seems to have no other option but to accept Sahara’s price,” they added.
“Goyal could be suing for a truce to prevent additional financial losses. He has already spent Rs 180 crore in running Air Sahara for three months. Also, Rs 500 crore has been paid in advance. Bank guarantees of Rs 1,500 crore have been given. All these funds are locked. Sahara has demanded Rs 350 crore as compensation for running the airline for a year. Under these circumstances, for Goyal it is better to negotiate a lower price rather than paying the full compensation,” said an investment banker close to the transaction.
Jet Airways, which had paid an advance of Rs 500 crore to Air Sahara and spent Rs 180 crore towards running the airline during the transition period, has been bargaining since Monday to pay a lower amount to settle the matter. Air Sahara executives said their demand of Rs 1,875 crore was not a discounted rate as made out to by Jet Airways.
“Earlier, the deal was for Rs 2,200 crore and of this Rs 325 crore was earmarked as creditors’ deductions. Anyway, we were to get Rs 1,875 crore from the sale. Since they have already paid an advance of Rs 500 crore, now our demand is that the balance Rs 1,375 crore must be paid to us directly without any creditors’ deduction. We will withdraw our case,” said sources in Air Sahara. Air Sahara is insisting that the fresh deal must be signed before the tribunal, which should be ratified by the Bombay High Court.