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AAI wants to buy out South African partners in MIAL while Adani drags Bidvest, GVK others to court

A GVK source said AAI hadn’t exercised its RoFR in time and there was no question of the state-owned company entering the fray.

, ET Bureau|
Updated: Sep 07, 2019, 01.09 PM IST
MUMBAI/NEW DELHI: State-owned Airports Authority of India (AAI) is said to be planning a surprise bid for the stake held by two overseas investors in Mumbai International Airport Ltd (MIAL), a top official told ET.

The stakes are held by Bidvest and ACSA, both of South Africa, which are seeking to exit the company.

Their combined 23.5% holding is at the centre of a tussle between the GVK Group, which runs the facility and wants to retain control, and the Adani Group, which is seeking to acquire the stakes.

“Both ACSA and Bidvest are ready to sell and we plan to bid for it,” said the AAI official cited above. “We have sought an approval from the aviation ministry on this.” AAI can comfortably fund the purchase, he said.

AAI has decided to bid as part of a bigger plan to get involved in public private partnership (PPP) projects through special purpose vehicles (SPVs) and also bid for greenfield PPP projects.

A GVK source said AAI hadn’t exercised its RoFR in time and there was no question of the state-owned company entering the fray.

The GVK Group won the right to develop Mumbai airport through a bidding process in 2006.

GVK airport holds a 50.50% stake in Mumbai International Airport Private Ltd (MIAL) that operates the airport in the financial capital. The consortium has invested about Rs 12, 000 crore in the project and is widely considered to have built a world-class airport- about Rs 6,000 crore came from GVK.

More importantly, GVK derives 90% of their group revenues from MIAL.

It is the second busiest airport in the country after Delhi. MIAL also owns 74% stake in a project to develop a new airport in Navi Mumbai.

The Adani Group had earlier this year offered to buy the stakes of Bidvest and ACSA. However, the GVK Group has the right of first refusal (RoFR), which it has exercised. But the Hyderabad-based infrastructure conglomerate hasn’t been able to complete the transaction.

This delay prompted the Adani Group to file a suit in the Bombay High Court on Wednesday against Bidvest, GVK, MIAL and AAI. Meanwhile, GVK is still engaged with an investor consortium in a bid to ringfence its crown jewel from a hostile takeover bid by Adani. This consortium consists of National Investment and Infrastructure Fund (NIIF), Abu Dhabi Investment Authority (ADIA) and PSP Investments.

Adani Group company Adani Properties said in its petition that it had signed a share purchase agreement (SPA) with Bidvest on March 5 to buy its stake in MIAL and that GVK and AAI had failed to exercise their right of first refusal within a 30-day period that ended on April 4 and August 1, respectively.

“The Hon’ble Court be pleased to declare the share purchase agreement dated 5th March 2019 is valid, subsisting and binding,” said the Adani suit, which ET has seen. The matter is due to come up for hearing on September 14.

The case names the civil aviation ministry and key MIAL lender State Bank of India as parties but doesn’t include ACSA (Airports Company South Africa). It appears that the Reddy family run GVK has entered into a separate agreement with ACSA under which it has time until September 30 to acquire the stake.

Adani and GVK declined to comment.

"Regarding court case stated to be filed by Adani Group against MIAL and AAI, our standing counsel has confirmed that no such case is received by him. No such petition or notice is received by AAI," a spokesperson for AAI said responding to ET's query.

AAI, Bidvest and ACSA didn’t respond to queries. Sources familiar with the matter said that GVK would contest the case in the Bombay High Court and that the Adani move did not come as a surprise.

In January, the Adanis offered to buy a total 23.5% of MIAL from Bidvest and ACSA at Rs 77 a share, valuing the airport at Rs 9,500 crore.

Their move came on the back of the Adanis emerging as the successful bidder earlier this year for upgrading and operating six airports--Ahmedabad, Lucknow, Jaipur, Guwahati, Mangalore and Thiruvananthapuram. ET was the first to report on Adani’s offer to buy into MIAL on February 22.

GVK filed an injunction in the Delhi High Court in an effort to block Bidvest from selling its stake to a third party on the grounds that it would exercise its right of first refusal and match the Adani offer. In April, GVK informed the exchanges that it had entered into a nonbinding agreement with NIIF-ADIA for its airports business at a valuation of around Rs 12,500 crore to reduce debt of up to Rs 5,750 crore.

However, in July, the Delhi High Court dismissed its plea to bar Bidvest from selling its stake to a third party. But the court allowed GVK to move an arbitration panel for interim relief against the order. Bidvest issued a notice to AAI expressing its willingness to monetise its stake, in case it wanted to exercise its right of refusal. At about the same time, the Reddys received high-cost structured debt funding of Rs 1,300 crore from a Goldman Sachs-led group of investors to tide over immediate debt repayment obligations.

But with GVK’s deal with NIIF-ADIA-PSP yet to be completed, Adani has said that GVK is delaying the sale process.

“GVK does not have the financial capability to acquire the shares of Bidvest,” according to the Adani suit. “GVK has failed to prove its readiness and willingness to complete the acquisition within the contractual period of 30 days starting from March 30, 2019. It is therefore apparent that the arbitration proceedings initiated by GVK are vexatious and merely in view to procrastinate the matter to enable it to make efforts in the meantime to try and raise funds by buying time and thereby frustrate and obstruct the performance of the contract between Bidvest and the plaintiff.”

Sources said the potential investors in MIAL have been insisting on a co-control deal with GVK, irrespective of the economic interest, and the right to appoint MIAL’s CFO.

The GVK Group has been selling stakes in various subsidiaries over the past few years to reduce debt of about Rs 24,000 crore and fund upcoming projects such as the Navi Mumbai airport. It exited Bengaluru International Airport in 2017 by selling its residual 10% stake worth Rs 1,290 crore to Canadian billionaire Prem Watsa’s Fairfax India Holdings. In May 2016, the developer had sold a 33% stake in BIAL to Fairfax for Rs 2,149 crore.

Also Read

Adani gets more time to buy Bidvest’s stake in MIAL

Amidst tussle with Adanis, GVK gets MCA notice after whistleblower complaint on fraud at MIAL

GVK taps NIIF-ADIA for Rs 6,500 crore to prevent Adani’s landing at MIAL

GVK moves High Court to stop Bidvest from selling MIAL stake to third party

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