Etihad has purchased 24 per cent stake in Jet Airways in a deal worth about Rs.2,060 crore deal, which was announced in April, 2013.
"...the fact that existing promoters hold 51 per cent shares and voting rights in Jet strengthen the stand of SEBI as communicated to the Ministry of Finance vide letter dated September 25, 2013 that Etihad cannot be termed as a person acting in concert along with the existing promoters of Jet under... Takeover Regulations, 2011," the regulator said in its 17-page order.
Under SEBI norms, an entity acquiring control in a listed company has to make an open offer to the target firm's shareholders.
The deal, which was restructured last year to address the concerns raised by SEBI and the Competition Commission of India (CCI), was consummated late in 2013.
While clearing the deal, the CCI had observed that Etihad was getting ‘significant rights' and ‘joint control' in running Jet Airways. The two carriers later petitioned the CCI to remove this observation, but the plea was rejected.
Following the Competition Commission's observations, SEBI had decided to have a fresh look at the deal. The capital market watchdog mainly looked into whether Etihad and the existing promoters of Jet were persons acting in concert (PACs) for the purpose of alleged ‘joint control' over Jet.
Besides, SEBI checked whether the rights of Etihad under the transaction documents confer ‘joint control' over Jet to Etihad.
According to SEBI, a conclusion of the Competition Commission that two parties are in joint control over an enterprise does not automatically lead to establishing joint control for the purposes of the Takeover Regulations, 2011.
Commenting on the SEBI order, global consultancy KPMG said the decision would allow Jet Airways to bring in the much needed funds and leverage the synergy benefits of the Etihad network. "The new government should consider raising the FDI limit in airlines from 49 per cent to 100 per cent as per the Mayaram Committee report," it added.
Partner and India head of aerospace and defence at KPMG, Amber Dubey said: "All the precious man-hours spent by government agencies and regulators on evaluating a subjective concept called ‘control' in a private corporate entity could have been put to better use."