India’s largest conglomerate, Tata Group, has begun due diligence of Jet Airways as it plans to acquire a controlling stake in the beleaguered airline, sources told. The process is expected to go on for the next few weeks.
Discussion between Tata Sons Chief Financial Officer Saurabh Agarwal and Jet Airways Chairman Naresh Goyal is underway, the report said.
Goyal is believed to have approached his peers and potential investors to bail out cash-strapped Jet, including the Tata group. After showing initial interest, the Tatas had asked Goyal to relinquish operational control over his company, if the deal were to go forward.
“Things have moved at a fast pace since then and Goyal has in-principle agreed to cede control to Tatas, subject to fulfilment of certain conditions. Such a condition includes how much premium the Tata Group is willing to pay to Goyal to cede control and whether he would continue in the company in some capacity if talks are successful,” a source told the paper.
In the past, Jet said it was open to an infusion of funds from external sources, which could result in a change in the company’s shareholding pattern. Goyal holds a controlling 51 percent stake in the airline.
The airline is selling its stake in Jet Privilege, its loyalty programme, which the Tatas are keen to buy, a source told the paper.
Private equity firms Blackstone Group and TPG Capital had shown interest in the programme, but were on the edge due to the company’s poor financial health.
Both firms have offered term sheets valuing the airline at $900 million in their initial, not in line with Goyal’s expectation of a valuation of over $1 billion.
Through this acquisition, Tata will grow its airline market share from 8.2 percent as of September-end to a whopping 24 percent. It has a presence in the market through AirAsia India and Vistara, a joint venture with Singapore Airlines.