India’s biggest-ever airline takeover deal has collapsed, with both sides arguing over who has the right to millions of dollars in frozen accounts that were to have been used to fund the acquisition.

Domestic market leader Jet Airways said in January that it would buy Air Sahara for $500 million but the deal fell apart last week after Jet walked away following a failure to secure final government approval by a deadline of 21 June. Local reports said Air Sahara’s owner, the Sahara Group, offered to extend the deal’s closing date but Jet wanted a lower asking price, which Sahara refused.

Lawsuits have already been filed and a lengthy legal battle is expected. Both sides went to court to have bank accounts in which Jet had deposited funds for the takeover frozen. In March, Jet chairman Naresh Goyal said the carrier had placed $445 million in an escrow account for the purchase. There are thought to be other accounts also holding funds that may be in dispute.

Industry analysts had for months been saying Jet agreed to pay too much for loss-making Air Sahara, which is seeing its market share fall as aggressive new players grow. The apparent sticking point which Jet was able to use to walk away from the deal was Goyal’s failure to get “security clearance” to join the Air Sahara board in time. ■

Source: Airline Business