The Jet-Sahara deal could be a fait accompli for both sets of promoters. Against the customary joint announcement on any merger, both the airlines — Jet Airways and Air Sahara — made the formal announcements separately, citing two different valuations of the deal.
At a media briefing in New Delhi on Thursday, Air Sahara President Alok Sharma said the enterprise value of the transaction was around Rs 2,000 crore. Jet Airways, on the other hand, disclosed that the equity value of the deal was only Rs 1,450 crore.
According to sources close to the transaction, Air Sahara sacrificed around Rs 275 crore and closed the deal at an enterprise value of Rs 2,025 crore. This includes an equity value of Rs 1,450 crore, Rs 180 crore paid by Jet Airways last year as a signing bonus, Rs 91 crore of interest accrued to Air Sahara on Rs 1,500 crore lying in the escrow accounts, liabilities of Rs 245 crore in the balance sheet of Air Sahara and around Rs 59 crore of its immovable assets, including four helicopters and some real estate.
In an official disclosure to the Bombay Stock Exchange, Jet Airways has only stated the current equity value of the deal. It did not mention the fact that it has paid a signing bonus of Rs 180 crore and other liabilities. Jet Airways stated "The company is agreeing to acquire all the shares of Sahara Airlines Ltd for a lump sum price of Rs 1,450 crore. Rs 500 crore has already been paid. Rs 400 crore is payable immediately, no later than April 20, 2007. The balance Rs 550 crore is payable in four interest-free annual equal installments commencing on or before March 30, 2008."
And one of the key reasons for the low-key Jet Airways announcement to the exchange could be the potential impact on Jet's share price. On Wednesday, when the deal size was reported at Rs 1,950 crore, the Jet Airways scrip was hammered and fell by 6 per cent to Rs 608.90 from Rs 644.85. On Thursday, after Jet Airways disclosed that the lump sum value of the deal was Rs 1,450 crore, its share price surged 3.2 per cent to Rs 628.65.
Sharma however, clarified that the deal was done "as is where is". "We have not talked about the past," he said.
Refusing to give any further details of the transaction, Sharma said, "We are bound by a confidentiality clause in the agreement."
Aviation industry experts say Air Sahara's hidden liabilities could be much higher than officially disclosed such as aircraft in immediate need of maintenance.
On the other hand, some of the accounting heads like the Rs 91 crore interest from the escrow account is counted in the Rs 2,000 crore deal value. Had this deal concluded in April 2006, Sahara would have earned this interest anyway.
Sources said the deal was forced upon the parties by the arbitration panel headed by British judge Lord Stein. Sharma, however, clarified that the deal would benefit both the promoters and the airline industry.