India’s largest business conglomerate, Tata Group, has held preliminary talks on Thursday to buy a large stake in debt-ridden Jet Airways Ltd.
Jet Airways has been unable to pay salaries to its pilots and employees on time plus have defaulted on a lot of payments.
Mr. Naresh Goyal, Founder of Jet Airways, has sought equity collaboration, however, Tata Sons, the parent company of the $103 million conglomerate, is looking for management control.
Several points like management rights and future role of Mr. Goyal is causing hindrances in the negotiations, but both the companies are exploring ways to agree on a common ground.
Tata Group is interested to buy at least a 26 percent stake in Jet, which would trigger an open offer of an additional 26 percent from Jet’s shareholders. What this means is that if Tata acquires the 26% stake, they will have an option to further buy 26 % stake from the shareholders later on, giving it total control over the Airline’s management.
Abu Dhabi-based Etihad Airways, which holds a 24 percent stake in Jet Airways, made a $35 million “cash pre-purchase payment” to help out the airline in financial troubles. However, Etihad Airways may sell a part or all of its stake in Jet Airways if the Tata Group comes into the picture.
Tata Sons chairman Mr. N Chandrasekaran has pushed the company’s aviation business through mergers and acquisitions. Currently, Tata has two aviation joint ventures, one with Singapore Airlines operating Vistara and the other with Air Asia.
With Tata’s investing heavily in the airline business it’s no surprise that they have gone with this decision to acquire Jet Airways.
Speculation is that former IndiGo president Mr. Aditya Ghosh, who is acting as an advisor to Tata Trust’s ‘Cancer Care Initiative’, may eventually pilot Tata’s aviation business. Only time will tell what’s the future of Jet Airways!