HISTORY OF TAKEOVERS We Pay HOMAGE To Late Shri Rama Prasad Goenka (RPG) The Legendary “ Takeover tycoon”. All his takeovers were friendly. No “animal spirit” to hold on to his prey. Gave up Premier Auto, Bombay dyeing, Dunlop & Haldia Petro.

HISTORY OF TAKEOVERS Lesson from RPG Make Takeovers friendly "Never make the employees of your target company lose their heart - wherever I enter I go alone with a pair of hands, I do not step into a new company with too many of my old people."

HISTORY OF TAKEOVERS By 1945 British firms started leaving India. By 1952, 66 European firms had been transferred to Indian ownership. Dalmia bought Govan Brothers and Bennett Coleman which owned the prominent daily-- The Times of India.

HISTORY OF TAKEOVERS Bangur bought Kettlewell Bullen. Surajmal Nagarmal bought Davenport and Mcleods (in jute and many other lines). Badridas Goenka bought Octavius Steel and Duncan Brothers; Kanoi bought Anderson Wright.

NEW TAKEOVER CODE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISTION OF SHARES AND TAKEOVERS) REGULATIONS, 2011 Or SAST 2011

SAST Notified on September 23, 2011 Came into force on 22 Oct 2011 Amended on 26 th March ICAI CONTRIBUTED IN DRAFTING SOME SUGGESTIONS ACCEPTED: not making the offer size as 100% not allowing Non compete fee.

ACQUIRER- Reg.2 (1) (a) “acquirer” means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company; WHO- ACQUIRES OR AGREES TO ACQUIRE WHAT-SHARES OR VOTING RIGHTS,OR CONTROL HOW- DIRECTLY OR INDIRECTLY, BY HIMSELF OR WITH PAC

CONTROL- Reg.2 (1) (e) includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

CONTROL- Reg.2 (1) (e) It is significant to note that in the draft suggested by TRAC, the definition was supposed to be widened further by adding “Or the ability”. The first line would have read : "control" shall include the right “Or the ability”to appoint majority of the directors By excluding “ or the ability” subjectivity has been removed.

PAC Reg.2 (1) (q) PAC-"person acting in concert“ Must have: a common objective or purpose of acquisition of share/voting rights/control Directly or indirectly co-operate pursuant to an agreement formal or informal

OFFER PERIOD Reg.2 (1) (p) Period between the date of : o Agreement, or o public announcement, and o the date of payment, or o the date on which open offer is withdrawn, o This has been relaxed a bit. Earlier, offer period continued till all formalities relating to the offer were completed.

SHARES Reg.2 (1) (v) shares in the equity share capital of a target company carrying voting rights, includes any security which entitles voting rights; Includes depository receipts carrying an entitlement to exercise voting rights Reg.10 (1)(h) exempts acquisition of Prefernce shares carrying voting rights u/s 87 (2) of Companies Act

SUBSTANTIAL ACQUISITION Reg. 3. (1) &(2) Acquiring 25% or more -, will have to make an Open offer. Trigger point – has been revised to 25% from earlier 15% CREEPING ACQUISITION—holding 25%+ but less than maximum permissible non-public shareholding(MP NP) cannot buy more than 5% (gross) in any Financial Year.

SUBSTANTIAL ACQUISITION Reg. 3. (3) Open offer triggered if a person acquiring shares- exceeds thresholds irrespective no change in the aggregate shareholding with PAC Very stringent provision- transfer amongst promoters would also attract open offer if a person who was not holding 25% will now hold 25% + even if the overall holding of the group remains the same.

ACQUISITION OF CONTROL Reg. 4 Even if 25% + shares have not been acquired But control has been acquired Open offer is triggered. Jet airways case is being examined by sebi

INDIRECT ACQUISITION Reg. 5(1) & (2) Acquisition of a company that will give powers over another company Although indirect but regarded as a direct acquisition if (a) NAV (b) SALES (c) MARKET CAP Of TC -More than 80% of consolidated entity

VOLUNTARY OFFER Reg.6. Prescribes eligibility criteria for the first time. Under SAST 1997 anyone could have announced an open offer Now only person holding 25% + can give open offer Upto MP NP holding. Cannot acquire any shares other than the open offer.

OFFER SIZE Reg. 7 MIN. 26% of total shares of the target company as of tenth working day from the closure of the tendering period But in Voluntary Offer: MIN. 10% & MAX –MP NP SHAREHOLDING. Implying that promoters already holding more than 65% cannot make open offer

OFFER SIZE Reg. 7 In the event of a competing offer, size can be increased to any number If MP NP limit is breached, must bring it down If MP NP limit is breached, pursuant to an open offer, cannot make delisting offer within 12 months. The acquirer, and the parties to agreement for sale of shares cannot participate in any open offer.

OFFER PRICE Reg. 8(2) IN CASE OF DIRECT ACQUISITION Highest of — (a) negotiated price per share (b) the volume-weighted average price paid in preceding 52 weeks from the date of the public announcement; (c) the highest price paid during 26 weeks

OFFER PRICE Reg. 8(2) (d) the volume-weighted average market price for preceeding 60 days if frequently traded; (e) If not frequently traded, the price determined by taking into account NAV,PE ETC. (f) the per share value computed under sub- regulation (5), if applicable.-indirect acquisition treated as direct.

OFFER PRICE Reg. 8(3) INDIRECT ACQUISITION Offer price shall be the highest of,— (a) negotiated price (b) average price paid in preceding 52 weeks from the earlier of, the date: on which the primary acquisition is contracted, and the date on which the intention or the decision to make the primary acquisition is announced in the public domain;

OFFER PRICE Reg. 8(3) (c) highest price paid in 26 weeks (d) the highest price paid by the acquirer between the earlier of, the date: on which the primary acquisition is contracted, and the date on which the intention or the decision to make the primary acquisition is announced in the public domain; And the date of Public Announcement

OFFER PRICE Reg. 8(3)&(4) (e) average market price for preceeding 60 days (f) the per share value computed under sub- regulation (5). If price cannot be determined under sub- regulation (3), determine by considering NAV,PE ETC.

OFFER PRICE Reg. 8(6)&(7) Conversion price of any outstanding convertible instruments, price paid, in any form whatsoever This not only disallows non compete fee but also any other type of payment. In one case – Dawn Mill, promoter’s residence was sold to them at book value which was insignificant as compared to the prevailing market price.

OFFER PRICE Reg. 8(8) Any shares acquired, at a higher price, offer price will be such higher price. Curfew period- no acquisition can be made after the third working day prior to the commencement of the tendering period and until the expiry of the tendering period.

OFFER PRICE Reg. 8 Price adjustment for corporate action allowed Dividend shall be adjusted only if it is 50%+ higher than last 3 year’s average If within 26 weeks of offer higher price paid, same shall be payable within 60 days.

MODE OF PAYMENT Reg.9 Cash; listed shares or debt instruments or convertible debt securities Combination of above – Cash & Securities If 10+% shares acquired by cash in prior 52 weeks, then shareholders can demand the price in cash

EXEMPTIONS Reg.10 inter se transfer amongst (i) immediate relatives; (ii) promoters (iii) a company, its subsidiaries, its holding company, other subsidiaries (iv) PAC FOR 3+ YEARS Provided price paid is not higher than 25%

EXEMPTIONS Reg.10 Acquisition in ordinary course of business by Banks,Underwriters,brokers etc. Sick cos, CDR schemes, Buy- back provided in 90 days brought back within limit Pursuant to Right issue

TIMING Announce PA on the date of agreement to Acquire Market purchase—PA shall be made prior to placement of the purchase order with broker that would breach the thresholds Wellspun had to give Open offer even though such purchase order was not executed in full & limits not breached.

TIMING, PUBLICATION & SUBMISSION Within 5 days of PA, DPS must be made Publication in all editions of any one English & HINDI national daily & regional daily Draft LoF with SEBI to be filed in 5 days of DPS SEBI to give comments in 15 days

PAYMENT 2 days prior to DPS deposit in escrow account : On the first 500 crore-25%+ On balance 10% in the form of,— (a) cash, (b) bank guarantee in favour of the manager to the open offer

PAYMENT etc. (c) deposit of frequently traded and freely transferable equity shares/security  Manager to offer must be empowered to pay.  upward revisions of offer price/number of shares can be made till 3 days before commencement of the tendering period.  Shareholders not entitled to withdraw  within 10 days of closing all requirement & payment to be completed.

WITHDRAWAL OF OFFER open offer made cannot be withdrawn except (a) statutory approvals disclosed in DPS has been refused (b) the acquirer, being a natural person, has died; (c) condition precedent not met.

WITHDRAWAL OF OFFER W.e.f. 26 MARCH 13 Open offer cannot be withdrawn, even if the proposed acquisition through the preferential issue is not successful. such circumstances as in the opinion of the SEBI, merit withdrawal.

OBLIGATION OF DIRECTORS OF TC Acquirer can be appointed as director only after 15 days of DPS and deposit of full consideration amount in cash in the escrow a/c. Reg.24. (2) in case of conditional upon minimum level of acceptances, acquirer cannot be appointed as director during the offer period.

OBLIGATION OF DIRECTORS OF TC reg.24. (3) during the pendency of competing offers, no acquirer can be made a driector reg.24. (4) if acquirer is already a director he shall not participate in any deliberations of the board of directors of the target company or vote on any matter in relation to the open offer.

OBLIGATION OF ACQUIRER Reg.25(1) firm financial arrangements Not to sell any material assets for a period of 2 YRS. Reg.25.(4) shall not sell shares during the offer period. Reg.25. (5) The acquirer and PAC shall be jointly and severally responsible

OBLIGATION OF TC Reg.26.(1) business AS USUAL. unless the approved by special resolution by postal ballot shall not, — (a) alienate any material assets (b) effect any material borrowings (c) issue or allot any authorised but unissued securities entitling voting rights:

OBLIGATION OF TC No record date can be fixed for a corporate action 3 days prior and until the expiry of the tendering period. Reg.26. (5) give the list of shareholders within 2 days of identified date Reg.26. (6) a committee of independent directors to provide reasoned recommendations

POWERS OF SEBI Directing: divestment of shares acquired in violation transfer of the shares, or any proceeds to the Investor Protection Fund not to give effect to any transfer of shares the acquirer not to VOTE Debarring from capital market

POWERS OF SEBI Directing: the acquirer to make an open offer Stopping any disposal of assets of TC to pay interest at appropriate rate not to make any open offer of TC Cease & desist from control over TC Divestment of shares beyond MP NP

INTERNATIONAL PRACTICE Whitewash provision an open offer not required. if a material majority of the shareholders pass a resolution waiving the open offer. Open offer is for the benefit of shareholders and it is their right to renounce such a benefit.

INTERNATIONAL PRACTICE Size of Offer- several international jurisdictions require offer for 100 % of the outstanding shares Indirect acquisitions -- triggers open offers only if indirectly held target company was a material part of the assets of the parent.

INTERNATIONAL PRACTICE Squeeze out of minority shareholders-- conferring the acquirer with a statutory right to acquire minority shareholders on same terms when the acquirer‘s shareholding crosses a certain high percentage of the voting capital of the target company.

THANK YOU CA Arun Goenka ANG Financial Consultants (P) Ltd. 703 Meadows, Sahar Plaza Complex, Andheri-Kurla Road, Andheri (E), Mumbai Mobile: Phone : / 49 Fax