Etihad Airways is betting big on India. The ambitious UAE carrier is throwing indebted Jet Airways, the largest publicly traded airline on the subcontinent, a $600 million lifeline.
The deal buys Etihad a 24 percent stake, control of Jet's loyalty programme, and landing slots at Heathrow. That makes it the first company to take advantage of newly relaxed foreign ownership rules in India, as it seeks to tap one of the fastest growing aviation markets in the world.
Jet is one of India's top airlines but the price paid still looks a bit generous. Etihad is paying $380 million or a 32 percent premium for its minority interest. That's on top of a 63 percent rise in the share price since mid-September when reports of a deal between the pair first surfaced. That type of premium is usually justified by a change of control. In this case, Jet founder Naresh Goyal will remain non-executive chairman, and retain a 51 percent stake.
Goyal has obviously driven a hard bargain even though his company badly needed the funds. The airline has to repay $400 million each year.
25/04/13 Una Galani/Daily News & Analysis
