MUMBAI (AFP) -India’s largest private carrier Jet Airways said it had clinched a deal to take over domestic rival Air Sahara after an earlier proposed 500-million-dollar agreement collapsed.

The takeover valued at 14.5 billion rupees (337.8 million dollars) will be India’s largest private airline merger.

“This deal is definitely going to be good for the shareholders,” Jet Airways founder and chairman Naresh Goyal told reporters in Mumbai, India’s financial centre on Thursday.

The merger collapsed nine months ago in a dispute over the cost of Sahara after Jet judged the initial 500 million dollar price too high.

Afterwards both sides went to court seeking money lodged in an account intended for the merger.

The takeover came amid arbitration hearings in Mumbai over the return of money to the two companies.

“Jet has decided to take over all the shares of Air Sahara and has resolved all disputes,” Harish Salve, legal advisor to Jet Airways said.

Jet shares rose 21.6 rupees or 3.55 percent to 630.5 rupees after the deal was announced.

As of last December, Jet held a 32.8 percent share of India’s booming aviation market while Air Sahara had an 8.7 percent share, according to official figures from the Directorate General of Civil Aviation.

India’s Economic Times reported on Thursday that Jet may launch Air Sahara as a separate low cost carrier under a new name.

At least half a dozen carriers, including budget airlines, have taken flight in the past three years in India’s liberalised skies, which were previously dominated by two state-run companies.

The sector is expected to see a wave of consolidation as analysts say there are too many airlines.

India’s airlines lost a total of 400 million dollars in the nine months ended December 2006 as high fuel and aircraft purchase costs hit carriers, airline experts told an aviation conference earlier this year.