Dubai: Etihad Airways has been issued with a ‘please explain’ over its minority acquisition of Jet Airways by the regulator of India’s securities market.
According to a report by Reuters, The Securities and Exchange Board of India (SEBI) issued a show cause notice on Wednesday.
SEBI is questioning if Etihad violated takeover rules when it acquired a 24 per cent stake in Jet Airways last year. It has reportedly asked Etihad why it should not make a tender offer to Jet Airways public shareholders as part of takeover rules. Etihad has 21 days to respond.
Reuters quoted a source with direct knowledge of the matter that declined to be named as the information is not public.
An Etihad spokesperson stated that the airline is “working very closely with the Indian Government and regulatory authorities to ensure we meet all the requirements of the new foreign direct investment legislation.”
Etihad will have to make an offer to buy the entire 25 per cent public holding if it fails to respond.
Etihad first announced the minority acquisition in April 2013; however, the deal was not announced until November 2013 during the Dubai Airshow. The deal came under increasing scrutiny and was only considered after the Indian government changed foreign ownership regulations of its tightly controlled aviation sector.
Last month it was reported that SEBI was taking another look at the deal after concerns were raised by the Competition Commission of India (CCI) with questions regarding who actually controls the airline.
James Hogan, Etihad’s President and Chief Executive and James Rigney, Etihad’s Chief Financial Officer, have both taken seats on the Jet Airways board.
The Etihad-Jet Airways deal includes a codeshare agreement that gives Etihad access to the highly protected Indian aviation sector.
Etihad now flies to 26 Indian cities, including the codeshare flights. It also received an additional 36,000 seats into India last year.
In November 2013, Jet Airways Chairman Naresh Goyal stated that foreign investment was in the best interest of India’s aviation sector.
“The infusion of foreign direct investment in the aviation sector will result in economies of scale, grow traffic at our airports, and create job opportunities,” he stated
In a surprising move Jet Airways Chief Executive Gary Toomey stepped down “with immediate effect” last month just six months after taking up the position.
Toomey had been appointed on a three-year contract in 2013. He previously served as president and chief executive of the Air New Zealand Group and was at the helm when Australian subsidiary Ansett collapsed in 2001.