In the biggest aviation takeover in India, Jet Airways [Get Quote] has struck a deal to buy Sahara Airlines for Rs 2,300 crore (Rs 23 billion), a move that would help Naresh Goyal promoted carrier to become the biggest domestic carrier.

"They have agreed to buy Sahara for $500 million in an all-cash deal," sources in Sahara Group said within minutes of Jet Airways informing the Bombay Stock Exchange its board decision to acquire Air Sahara.

In its communication Jet Airways informed the BSE that "the board of directors of the company has considered and approved the acquisition by the company of 100 per cent of the fully paid up equity share capital of Air Sahara."

The deal is, however, subject to receipt of regulatory approvals as may be required.

Sources said the deal was inclusive of all the liabilities of Air Sahara, which were brought down to about Rs 150 crore (Rs 1.5 billion) ahead of the takeover agreement.

This would mean the acquisition of 27 aircraft fleet for about Rs 2,450 crore (Rs 24.50 billion), a price significantly lower than the valuation of up to $1 billion that Sahara Airlines had done through Ernst and Young.

Sources said that Sahara had also agreed to forego its claim on Air Sahara brand and it was up to Goyal's company to decide the next course of action indicating that in next two-three months Jet would merge the brand in the parent company.

On the Cricket's sponsorship that it clinched last month, Sahara sources said that this would continue to be with the group.

Immediately after issuing a joint statement, Naresh Goyal said in Mumbai that while no liability would be transferred to Jet's balance sheet, the issue of international flying rights to his company would be subject to regulatory approvals.

Stating that the deal would help Jet increase its market share from current level of 35 per cent to 40-45 per cent, Goyal said that absorbtion of staff from Sahara would be only on 'merit basis'.

Sahara India confirmed that workers would "not lose their jobs... and gross emoluments will be unaffected. Upon closure of the transaction, based on requirements and performance, Jet Airways shall absorb suitable employees."

As part of the deal, Sahara's assets including infrastructure and parking slot facilities in the country would now be owned by Jet.

On the issue of price war in the aviation sector, Goyal categorically stated that "we are not planning to make it (Sahara Airlines) any low-cost carrier."

Assuring maximum benefits to the shareholders, Goyal said due to economies of scale the cost of operations would go down substantially leading to improved revenues and profitability.

On source of funding the takeover deal, Goyal said all cash would come from internal accruals. Goyal also said that his company would approach the regulatory authority for merging the Air Sahara brand with the parent company.

The existing agreements between Air Sahara and its clients/customers would be reviewed by Jet Airways.

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