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.
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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."
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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.

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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.

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NEW TAKEOVER CODE
SECURITIES AND EXCHANGE BOARD OF
INDIA (SUBSTANTIAL ACQUISTION OF
SHARES AND TAKEOVERS)
REGULATIONS, 2011
Or
SAST 2011
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SAST - 2011
Notified on September 23, 2011
 Came into force on 22 Oct 2011
 Amended on 26th March 2013.
 ICAI CONTRIBUTED IN DRAFTING
SOME SUGGESTIONS ACCEPTED:

not making the offer size as 100%
 not allowing Non compete fee.

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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
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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.
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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.
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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

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OFFER PERIOD Reg.2 (1) (p)
o
o
o
o
o
Period between the date of :
Agreement, or
public announcement, and
the date of payment, or
the date on which open offer is withdrawn,
This has been relaxed a bit. Earlier, offer period
continued till all formalities relating to the offer
were completed.
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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
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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.
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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.
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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
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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

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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.
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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
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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.
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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
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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 subregulation (5), if applicable.-indirect acquisition
treated as direct.
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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;
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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
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OFFER PRICE Reg. 8(3)&(4)
(e) average market price for preceeding 60
days
(f) the per share value computed under subregulation (5).
 If price cannot be determined under subregulation (3),
 determine by considering NAV,PE ETC.
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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.
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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.
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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.

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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

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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%
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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

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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.

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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

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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

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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.
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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.

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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.
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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.

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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.

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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

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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:

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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

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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
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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
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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.

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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.
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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.
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THANK YOU
CA Arun Goenka
ANG Financial Consultants (P) Ltd.
703 Meadows, Sahar Plaza Complex,
Andheri-Kurla Road, Andheri (E),
Mumbai 400 059
Mobile: +91 932309 1348
Phone : 022 - 2838 1348/ 49 Fax 022- 4215 1349
www.ang-resources.com
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