Sebi takeover norm panel hikes open offer trigger to 25%

Like this story, share it with millions of investors on M3

0

Like this story, share it with millions of investors on M3

Sebi takeover norm panel hikes open offer trigger to 25%

The committee appointed by the Securities Exchange Board of India (Sebi), under the chairmanship of the former head of Securities Appellate Tribunal C Achuthan, has submitted its report to the market regulator.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS SEBI chalks out framework for stock derivatives

The committee appointed by the Securities Exchange Board of India (Sebi), under the chairmanship of the former head of Securities Appellate Tribunal C Achuthan, has submitted its report to the market regulator.

The committee was formed in September 2009 and its mandate was to look at an overall change in takeover norms.

Addressing mediapersons, Achuthan said the panel has decided to re-write the entire takeover code. The report is split into two parts. The first part indicates policy framework while the second includes draft regulations to crunch the implementation timeline.

Open offer:
The open offer trigger has recommended a hike to 25% from the current 15%. Companies have been seeking a higher open offer trigger threshold. "We have expanded the scope of control to trigger an open offer," he said.

Moreover, the panel wants the timeline for the offer to be to 57 working days. If approved, companies will now have to make a public announcement of the open offer on the same day as the shareholder agreement. Earlier, companies had four days to make this announcement public.

For a voluntary open offer, the minimum offer size would now be 10% with a maximum being 75%.

The panel has recommended an offer for the entire 100% equity holding in case of a statutory open offer. "If the statutory offer crosses 90% of the equity, companies will be delisted automatically. However, if the offer fails to cross 90%, the public float would have to be maintained at 25%," he explained.

"The committee after taking into consideration felt that 20% is not an equitable one. Everybody should get an opportunity to exit, so why only a fraction. So, we have recommended that the offer size should now be increased to 100%," he added.

As per the recommendations, an open offer will also get triggered if promoters acquire more than 5% in any fiscal.

The panel has also streamlined exemptions from open offer. These include buybacks, inter se transfers, corporate debt restructuring, rights issues, and schemes of arrangement not involving the target company.

Creeping acquisition:
There are no changes recommended in the creeping acquisition norms, except that the upper limit has been suggested at 75% instead of the present 55%.

Non-compete fee:
As expected, the panel has done away with non-compete fees to promoters in an open offer.

Price determination:
In a move that could bring cheer to investors, the average cost of acquisition for 52 weeks has been added as a parameter for price determination. A 60 trading day weighted average price has also been included in the list of prices to be considered to determine offer price.

This will now go down well with the street which was against the six-month average price in the first place. Some companies wanted the period to be as low as two weeks to reflect the prevalent market situation.

Share swaps:

Share swaps have been enabled as mode of payment for a 100% offer. "Enabling changes for share swaps were made in the Issue of Capital and Disclosure Requirements (ICDR) guidelines," Achuthan stated.

Indirect acquisition:
The panel has also clarified on indirect acquisition rules. "If the Indian target company is more than 80% of the parent's assets, then the indirect acquisition will be treated as a direct acquisition," he said. The takeover panel also wants the announcement for an indirect acquisition to be made on the same day.