US-based investment firm Interups has withdrawn its bid for Air India following potential legal challenges. The firm hoped to partner with Air India employees, giving them 51% of the airline and keeping 49%. However, the presence of another consortium of employees may have led to legal trouble, resulting in Interups dropping its bid.
Last-minute withdrawal
Interups Chairman Laxmi Prasad once called his bid for Air India against the Tata Group as a David vs. Goliath situation, in a statement to the BBC, adding that "but David mastered the winning, and we are equally confident." However, less than two weeks later, Interups is out of the running to take over Air India.
According to Times of India, Interups only opted to withdraw its bid hours before the deadline closed. All bidders had to submit a physical copy of their Express of Interest (EoI) by December 29th. However, a potential legal challenge regarding its plans to include employees in the bid forced them to withdraw their bid.
Explaining the legal issue to the Times of India, Mr. Prasad said that the rules of the sale say that “no two interested bidders either individually or as a member of consortium shall be entitled to take the benefit of financial strength of the same affiliate for the purpose of participating in the proposed transaction either directly or indirectly.”
Since there is already another employee-backed bid in place, Interups opted to withdraw their bid instead. Not doing so could have resulted in both bidders being removed, leaving only one or two bidders. However, Interups may still play a role in the process.
Not out just yet
While the deadline to stand a bid has now passed, Interups has said that it is open to backing another bidder. In particular, the firm wants to back the bid from Air India Board Member Meenakshi Malik and 219 other employees.
The employee-run company would partner with private to raise funds and sell up to 49% of the airline. Interups is proposing to buy this 49% stake and providing all the financial backing needed, similar to its original plan.
However, this Meenakshi Malik-led bid has run into problems, with some pilot unions against the deal. The union has demanded that the airline management explain the pay cut disparity between pilots (70%) and leadership (10%).
Tata remains in the lead
Interups has made it clear that it also withdrew its bid to ensure the Tata Group is not the airline's sole bidder. Tata already has the financial resources, history in the industry, and name recognition to be the favorite. However, other bidders want to ensure that they have a fair chance of winning.
SpiceJet owner Ajay Singh also reportedly placed a bid for Air India, although this remains unconfirmed. As details of the final bidders emerge next week, the race for Air India is quickly heating up.
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