Description
Describes the rules and ways of merger and take overs in India.
Mergers and Take Overs
Mergers and Take Overs
? 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.
Mergers and Take Overs
? An Acquirer means and includes persons acting
in concert (PAC) with him i.e. any individual/company/any other legal entity, which intends to acquire or acquires substantial quantity of shares or voting rights of target company or acquires or agrees to acquire control over the target company
Mergers and Take Overs
? PACs are individual(s) /company(ies)/ any other
legal entity(ies) who are acting together for a common objective or for a purpose of substantial acquisition of shares or voting rights or gaining control over the target company pursuant to an agreement or understanding whether formal or informal. Acting in concert would imply cooperation, co-ordination for acquisition of voting rights or control. This co-operation/ co-ordinated approach may either be direct or indirect.
Mergers and Take Overs
? Consolidation of holding:
? An acquirer, who holds 75% shares or voting
rights of a target company, can acquire further shares or voting rights only after making a public announcement to acquire at least additional 20% shares of Target Company from the shareholders through an open offer.
Mergers and Take Overs
? How is “control” defined?
? Control includes the right to appoint directly or indirectly or by virtue
of agreements or in any other manner majority of directors on the Board of the target company or to control management or policy decisions affecting the target company. However, in case there are two or more persons in control over the target company the cesser of any one of such persons from such control shall not be deemed to be a change in control of management nor shall any change in the nature and quantum of control amongst them constitute change in control of management provided this transfer is done in terms of Reg. 3(1)(e). Also if consequent upon change in control of the target company in accordance with regulation 3, the control acquired is equal to or less than the control exercised by person (s) prior to such acquisition of control, such control shall not be deemed to be a change in control.
Mergers and Take Overs
? The concept of PAC assumes significance in the
context of substantial acquisition of shares since it is possible for an acquirer to acquire shares or voting rights in a company “in concert” with any other person in such a manner that the acquisition made by them may remain individually below the threshold limit but may collectively exceed the threshold limit
Mergers and Take Overs
? Threshold of disclosure to be made by
acquirer(s):
?
5% and more shares or voting rights: A person who, alongwith PAC, if any, (collectively referred to as “ Acquirer” hereinafter) acquires shares or voting rights (which when taken together with his existing holding) would entitle him to more than 5% or 10% or 14% shares or voting rights of target company, is required to disclose at every stage the aggregate of his shareholding to the target company and the Stock Exchanges within 2 days of acquisition or receipt of intimation of allotment of shares.
Mergers and Take Overs
? Any person who holds more than 15% but less
than 75% shares or voting rights of target company, and who purchases or sells shares aggregating to 2% or more shall within 2 days disclose such purchase/ sale along with the aggregate of his shareholding to the target company and the Stock Exchanges
Mergers and Take Overs
?
Any person who holds more than 15% shares or voting rights of target company and a promoter and person having control over the target company, shall within 21 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration, disclose every year his aggregate shareholding to the target company.
Mergers and Take Overs
? The Target company, in turn, is required to inform
all the stock exchanges where the shares of Target Company are listed, every year within 30 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration.
Mergers and Take Overs
? Trigger point for making an open offer by an
acquirer ? 1) 15% shares or voting rights: ? An acquirer who intends to acquire shares which alongwith his existing shareholding would entitle him to exercise 15% or more voting rights, can acquire such additional shares only after making a public announcement (PA) to acquire at least additional 20% of the voting capital of Target Company from the shareholders through an open offer.
Mergers and Take Overs
? Creeping acquisition limit:
? An acquirer who holds 15% or more but less
than 75% of shares or voting rights of a target company, can acquire such additional shares as would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31 only after making a public announcement to acquire at least additional 20% shares of target company from the shareholders through an open offer.
Mergers and Take Overs
? A public announcement is an announcement
made in the newspapers by the acquirer primarily disclosing his intention to acquire shares of the target company from existing shareholders by means of an open offer.
Mergers and Take Overs
? The disclosures in the announcement include
the offer price, number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed
Mergers and Take Overs
? The Public Announcement is made to ensure that
the shareholders of the target company are aware of an exit opportunity available to them. ? The acquirer cannot make an offer for less than 20% of shares. The acquirer has to make an offer for a minimum of 20% or the balance, if the balance is less than 20%.
Mergers and Take Overs
? The Acquirer is required to appoint a
Merchant Banker (MB) registered with SEBI before making a PA. PA is required to be made through the said MB. The acquirer is required to make the P.A within four working days of the entering into an agreement to acquire shares or deciding to acquire shares/ voting rights of Target Company or after any such change or changes as would result in change in control over the target company.
Mergers and Take Overs
? A letter of offer is a document addressed to the
shareholders of the target company containing disclosures of the acquirer/ PACs, target company, their financials, justification of the offer price, the offer price, number of shares to be acquired from the public, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed.
Mergers and Take Overs
doc_499891915.ppt
Describes the rules and ways of merger and take overs in India.
Mergers and Take Overs
Mergers and Take Overs
? 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.
Mergers and Take Overs
? An Acquirer means and includes persons acting
in concert (PAC) with him i.e. any individual/company/any other legal entity, which intends to acquire or acquires substantial quantity of shares or voting rights of target company or acquires or agrees to acquire control over the target company
Mergers and Take Overs
? PACs are individual(s) /company(ies)/ any other
legal entity(ies) who are acting together for a common objective or for a purpose of substantial acquisition of shares or voting rights or gaining control over the target company pursuant to an agreement or understanding whether formal or informal. Acting in concert would imply cooperation, co-ordination for acquisition of voting rights or control. This co-operation/ co-ordinated approach may either be direct or indirect.
Mergers and Take Overs
? Consolidation of holding:
? An acquirer, who holds 75% shares or voting
rights of a target company, can acquire further shares or voting rights only after making a public announcement to acquire at least additional 20% shares of Target Company from the shareholders through an open offer.
Mergers and Take Overs
? How is “control” defined?
? Control includes the right to appoint directly or indirectly or by virtue
of agreements or in any other manner majority of directors on the Board of the target company or to control management or policy decisions affecting the target company. However, in case there are two or more persons in control over the target company the cesser of any one of such persons from such control shall not be deemed to be a change in control of management nor shall any change in the nature and quantum of control amongst them constitute change in control of management provided this transfer is done in terms of Reg. 3(1)(e). Also if consequent upon change in control of the target company in accordance with regulation 3, the control acquired is equal to or less than the control exercised by person (s) prior to such acquisition of control, such control shall not be deemed to be a change in control.
Mergers and Take Overs
? The concept of PAC assumes significance in the
context of substantial acquisition of shares since it is possible for an acquirer to acquire shares or voting rights in a company “in concert” with any other person in such a manner that the acquisition made by them may remain individually below the threshold limit but may collectively exceed the threshold limit
Mergers and Take Overs
? Threshold of disclosure to be made by
acquirer(s):
?
5% and more shares or voting rights: A person who, alongwith PAC, if any, (collectively referred to as “ Acquirer” hereinafter) acquires shares or voting rights (which when taken together with his existing holding) would entitle him to more than 5% or 10% or 14% shares or voting rights of target company, is required to disclose at every stage the aggregate of his shareholding to the target company and the Stock Exchanges within 2 days of acquisition or receipt of intimation of allotment of shares.
Mergers and Take Overs
? Any person who holds more than 15% but less
than 75% shares or voting rights of target company, and who purchases or sells shares aggregating to 2% or more shall within 2 days disclose such purchase/ sale along with the aggregate of his shareholding to the target company and the Stock Exchanges
Mergers and Take Overs
?
Any person who holds more than 15% shares or voting rights of target company and a promoter and person having control over the target company, shall within 21 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration, disclose every year his aggregate shareholding to the target company.
Mergers and Take Overs
? The Target company, in turn, is required to inform
all the stock exchanges where the shares of Target Company are listed, every year within 30 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration.
Mergers and Take Overs
? Trigger point for making an open offer by an
acquirer ? 1) 15% shares or voting rights: ? An acquirer who intends to acquire shares which alongwith his existing shareholding would entitle him to exercise 15% or more voting rights, can acquire such additional shares only after making a public announcement (PA) to acquire at least additional 20% of the voting capital of Target Company from the shareholders through an open offer.
Mergers and Take Overs
? Creeping acquisition limit:
? An acquirer who holds 15% or more but less
than 75% of shares or voting rights of a target company, can acquire such additional shares as would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31 only after making a public announcement to acquire at least additional 20% shares of target company from the shareholders through an open offer.
Mergers and Take Overs
? A public announcement is an announcement
made in the newspapers by the acquirer primarily disclosing his intention to acquire shares of the target company from existing shareholders by means of an open offer.
Mergers and Take Overs
? The disclosures in the announcement include
the offer price, number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed
Mergers and Take Overs
? The Public Announcement is made to ensure that
the shareholders of the target company are aware of an exit opportunity available to them. ? The acquirer cannot make an offer for less than 20% of shares. The acquirer has to make an offer for a minimum of 20% or the balance, if the balance is less than 20%.
Mergers and Take Overs
? The Acquirer is required to appoint a
Merchant Banker (MB) registered with SEBI before making a PA. PA is required to be made through the said MB. The acquirer is required to make the P.A within four working days of the entering into an agreement to acquire shares or deciding to acquire shares/ voting rights of Target Company or after any such change or changes as would result in change in control over the target company.
Mergers and Take Overs
? A letter of offer is a document addressed to the
shareholders of the target company containing disclosures of the acquirer/ PACs, target company, their financials, justification of the offer price, the offer price, number of shares to be acquired from the public, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed.
Mergers and Take Overs
doc_499891915.ppt