INDIAN TAKEOVERS

Meaning Of Acqusition: When an “acquirer” takes over the control of the “target company”, it is termed as takeover. When an acquirer acquires “substantial quantity of shares or voting rights” of the Target Company, it results into substantial acquisition of shares.

Types of Takeover Friendly Takeover Hostile TakeoverBailout Takeover

REGULATION 6 It states that any person holding at the time of commencement 5% or more of the Shareholding must intimate to the Company within 2 Months of date of notification and the Company must intimate such holding to stock exchange where the Companies shares are listed within 3 months of the date of notification. This is also applicable on the Promoters of the Company.

Regulation 7 Any Acquirer who acquires shares or the Voting rights which would entitle him to More than 5% or 10% or 15% or 54% or 74% must disclose within four days to the Company and Stock Exchange where shares are listed. The four days will be from 1) Date of receipt of Intimation 2) The acquisition of shares as the case may be. Where the Acquirer has acquired the Shares together with persons acting in concert shall disclose purchase or sale aggregating to 2% or more of the share capital shall within four days disclose to Company and stock exchange. The stock exchange must display information received on trading screen, the notice board and at website with 7 days of receipt of Information The Company whose share have been acquired in manner stated above must intimate such information to Stock exchange within 7days of Receipt of information.

Regulation 8 For continual disclosure: Every person who holds more than 15% shares or voting rights in any company shall within 21days from the end of Year (31 st March.) must within 21 days discloses to the Company about such holding. The promoter is required to disclose not only at the end of financial year but also the record date for purpose of declaration of Dividend. Every Company whose shares are listed on the stock exchange shall with in 30 days from the end of financial year or from the Record date for dividend must intimate such holding of shares to stock exchange.

Regulation 9: Power to call for information The stock exchange and the Company shall submit information relating to Regulation 6,7 and 8 to SEBI as and when required by the Board

Regulation 10: Acquisition of 10% or more shares by the Acquirer No acquirer Shall acquire which when acquire in single or in persons acting in concert with him entitle such acquirer to exercise 10% or more of the Voting rights in a company unless acquirer makes a public announcement. This is not required where such acquisition is on a right share basis and such acquisition does not result in holding more than 55% of the voting rights

Regulation 11 Consolidation of Shares No acquirer shall acquire additional shares entitling him to exercise more than 10% voting rights along with the voting rights he already has in any financial year unless public announcement is made for such acqusition No acquirer who holds 55% or more but less than 75% shall acquire either by himself or through the persons acting in concert unless public announcement for same has been made. Where the case involved is of disinvestment of a public sector undertaking an acquirer who together with persons acting in concert with him has made a public announcement shall not be required to make further announcement for further acquisition of shares

Regulation 12 Acquisition of Control over the Company Control on target company cannot cannot be acquired unless public announcement for same has been made.

Regulation 13 : Appointment of Merchant Banker Before making public announcement for acquiring shares under regulation 10,11 and 12 an acquirer must appoint Merchant Banker holding a certificate of registration granted by Board and merchant banker must not be associated with acquirer or group of acquirer

Regulation 14: Timing of Public Announcement of Offer The Public announcement shall be made by the merchant banker within four working days of entering into agreement for acquisition of shares exceeding the prescribed limits.

Regulation 15: Public announcement of offer The public announcement under reg 10,11 and 12 must be made in all editions one English national daily, one Hindi national daily and regional language where the registered office of the target company is located and at the place where the shares are frequently traded. The copy of same must be submitted to Board through the merchant banker Sent to all stock exchange where the shares of the companies are listed Sent to target company at its registered office

Regulation 16 Contents of public announcement of offer  Paid up share capital of the target company, number of fully paid up and partly paid up shares  Percentage of shares proposed to be acquired  Minimum offer price for each share  Identity of persons having control over such company  Existing shareholding of acquirer  Existing shareholding of merchant banker in target company  Highest and average price paid by acquirer or persons acting in concert during 12 months preceding to date of public announcement  Object and purpose of acquisition  Specified date as mentioned in Regulation 19  Date by which the individual letters of offer would be posted to each of the shareholder  Date of opening and closure of offer  Date by which the payment of consideration would be made for share

Regulation 17: Brochures, advertising material The public announcement must not contain any misleading information

Regulation 18: Submission of letter of offer to the Board Within 14 days from the date of public announcement acquirer shall through the merchant banker file with the Board draft of letter of offer which must be submitted to shareholders within 21days from the date of its submission to Board Fees to be paid along with submission to Board depending on the issue size

Regulation 19: Specified date The public announcement shall specify the date for determining the names of shareholders to whom the letter of offer should be sent. The specified date cannot be later than 30 th day from the date of public announcement

Regulation 20: Offer Price Where the shares of the Company are frequently traded: The minimum offer price will be the highest of the following:  The negotiated price as per the agreement  The highest of the price paid by the acquirer or persons acting in concert with him for any acquisition including by way of allotment or right issue during the 26 weeks period prior to date of public announcement  The price paid by the acquirer under the preferential allotment to him or the person acting in concert at any time during the 12 months period up to the date of closure of offer  The average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange during the 26 weeks preceding to the date of public announcement. When the shares of the company are not frequently traded: The minimum offer price will be highest of the following:  The first three points will be same as if the shares are frequently traded.  The fourth point will be : price determined taking into consideration the factors like: Net profit of the Company, Earning per share, book value of shares of the target company.

Regulation 21: Minimum number of shares acquired The public offer made by the acquirer to the shareholders of the target company shall be for minimum 20% of the voting capital of the Company

Regulation 22,23 and 24 These three regulations deals with:  Obligation of Acquirer (22)  Obligation of Board of Directors of the target company.(23)  Obligation of Merchant Banker(24)

Regulation 25: Competitive Bid Any person, other than the acquirer who has made the first public announcement, can make a public announcement within 21 days from the date of first public announcement. Any competitive offer shall be for such number of shares which when taken together with the shares held by him along with person acting in concert shall be at least equal to or more than holding of first bidder.

Regulation 26: Revision of offer The acquirer can at any time up to 7 working days prior to date of closure of offer. The revisions can be in respect of following:  Changes in original public announcement in all newspapers where the original public announcement was made  Increasing the value of Escrow account

Regulation 27: Withdrawal of offer No public offer can be withdrawn except under the following circumstances:  The statutory approval(s) required have been refused  The sole acquirer being a natural person has died Withdrawal must be subject to:  Publish about the withdrawal in the newspapers in which the offer for public announcement was made  Intimate to stock exchange, Board and the target company about such withdrawal

Regulation 28: Provision of Escrow account: The acquirer must deposit in escrow account such amount as security for performance of his obligation. Amount of Escrow:  Not subject to minimum level of acceptance:  Subject to Minimum level of acceptance of 20% than 50% of the consideration will be deposited. Up to 100 Crores: 25 % Upto 100 crores : 25% and 10% thereafter

Regulation 29: Payment of consideration Amount of such sum payable must be deposited within 7 days from the closure of offer with a Banker to an issue registered with the Board together with 90% of the amount lying in escrow account

TULSI DARYANANI