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Tatas keen to buy out Naresh Goyal, merge Jet Airways with Vistara

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The promoter of cash-strapped Jet Airways Naresh Goyal has been reportedly approaching top corporate houses, including the Tata, for a possible equity infusion.

Tatas keen to buy out Naresh Goyal, merge Jet Airways with Vistara
The promoter of cash-strapped Jet Airways Naresh Goyal has been reportedly approaching top corporate houses, including the Tata, for a possible equity infusion.
Goyal recently met Tata Sons chairman N Chandrsekaran to discuss the possibility of a deal, people familiar with the matter told CNBC-TV18. After the initial meeting, a top Tata team went to the drawing board to discuss if there is merit in a deal, they said, adding that the group met the Jet management for a second round of discussions. They did not want to be named
“The meeting was largely to discuss what terms both parties, especially the Tata Group wanted, if they were to take the conversations forward,” said one of the persons familiar to the discussions. “At the stage, the conversations are at a very exploratory stage and are being steered more by Jet airways than the Tatas,” he added.
When contacted a Tata group spokesperson said, “We do not comment on speculation.” A Jet Airways spokesperson responded to CNBC-TV18 query saying, “Your information on the above is totally speculative.” Etihad was unavailable for comment for this article.
What Tata Group Wants?
The salt-to-software Tata Group is keen on buying out the promoters, Naresh Goyal and family, and the foreign equity partner, Etihad’s stake in Jet Airways. Currently, Jet Airways promoters hold 51 percent stake in the carrier and Etihad holds 24 percent.
“If Tata Group takes the conversation forward, it would want a clean slate. It has been focused on turning around operations across its ventures including Air Asia. It would not make sense to acquire only a part stake in Jet, especially within the financial position that it is in,” said another person directly connected to the proposed deal.
Further, two independent sources familiar with the deal said that if the deal would go through, Tata Group may look at merging Vistara with Jet Airways. “Tata Group already has two airlines. If it were to acquire another airline it would want controlling stake and merge with Vistara,” said the source.
What’s Attractive About Jet To Tata?
The Tatas have long been interested in aviation. Despite issues around crude and ATF (air turbine fuel) prices, the long-term growth story of aviation seems to be positive. “Tata group wants to be in the big leagues and wants to expand intentionally. Jet’s international business has been doing well. If Tata Group were to consider a merger of Vistara with Jet, it would be largely for the international business;” said one of the independent sources. “Vistara has been looking at entering the international space but if it were to do that organically, it would take many years to cover the routes and profitability that Jet Airways' international operations have. Add to that Jet’s domestic routes will fill the gaps in Vistara’s portfolio.”
But it’s not just the international operations Jet Airways also has a fleet of at least 16 wide-body aircraft, Boeing 777 and Airbus A330, and about 330 pilots trained to fly wide-bodied aircraft which are very attractive to a currently expanding Vistara.
While these are all exploratory conversations at this point, it is unclear if Naresh Goyal is willing to completely exit the airline. Etihad has reportedly been looking for ways out but hasn’t entered the discussions yet.
The shares of Jet Airways rose to an almost 11 percent high after CNBC-TV18 reported the story and the end day 9 percent in the green.
Disclaimer: Vistara is one of the four launching partners of CNBCTV18.com.
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