A possible merger between low-cost carriers SpiceJet and the Wadia Group-owned GoAir has hit a roadblock after the two sides failed to arrive at a consensus on valuation and branding related issues, two persons familiar with the development told ET NOW.
SpiceJet and GoAir have an agreement of exclusive negotiations till March 2010 to execute the deal. One of the key stumbling blocks was the amount of unsecured loans on GoAir’s balance sheet, said the first person on conditions of anonymity. The other executive said the two companies were close to signing a memorandum of understanding three weeks ago but could not agree on a share swap ratio to execute the transaction.
A spokeswoman for GoAir said the talks of a proposed merger was baseless. She said GoAir has categorically stated that the decision taken by the board of the company is not to proceed with any such proposal and focus on its plan to raise its fleet size from of eight to 12 aircraft.
Repeated attempts to contact SpiceJet officials and a detailed email query to the company did not elicit any response. ET NOW has learnt the cashless transaction was to be executed through a share swap agreement between the promoters of GoAir and its shareholders and the promoters of SpiceJet and its shareholders. Rothschild & Sons is the advisor to the proposed transaction.
As per the proposed transaction, shareholders of GoAir were to be issued shares of SpiceJet based on an agreed value as determined by the share swap ratio. After the valuation agreement, the boards of the two companies were to approve a scheme of arrangement.
The transaction structure also proposed that all sponsored loans, quasi-equity and unsecured loans on GoAir’s balance sheet be converted into equity prior to the consolidation transaction.
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