A PRESENTATION ON:
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TAKEOVER AND TAKEOVER CODES
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Presented by:
TAKEOVER
• Under the MRTP Act,takeover means acquisition of not less than 25% of voting power in a company.A takeover is basically a forced or unwilling acquisition.In this kind of acquisition the management of the “target company” might oppose the move of being taken over.
Generally a takeover is a part of or kind of acquisition. • A takeover takes place when the acquiring firm takes over the control of the target firm. • A takeover does not necessarily entail full,legal control. • A company can have effective control over another company by holding minority ownership. • Section 372 of the Companies Act defines the limit of a company’s investment in the shares of another company.
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Takeover versus Acquisition
• Takeover generally is hostile and forceful in nature whereas acquisition is a mutual agreement between acquiring and target company. • An unwilling acquisition or takeover may be opposed whereas a mutually agreed acquisition is not opposed(generally).
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Tender Offer And Hostile Takeover
• A Tender Offer is a formal offer to purchase a given number of a company’s share at a specific price.The acquiring company asks the shareholders of the target company to “tender” their shares in exchange for a specific price. • The price is generally quoted at a premium in order to induce the shareholders to tender their shares. •
Hostile Takeover: • The tender offer may be used without any negotiations,and it may be tantamount to a hostile takeover. • The shareholders are generally approached through announcement in the financial press or through direct communication individually. • Their reaction exclusively depends upon their attitude and sentiment and the difference between the market price and the offered price.
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Takeover codes
Takeover codes are basically the set of rules to be followed in case of mergers,acquisitions or any such activity. ?Takeover codes,as such,is the regulatory framework meant for regulating the process of mergers and acquisitions.
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SUBSTANTIAL ACQUISITION OF SHARES ,VOTING RIGHTS OR CONTROL • No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company, entitle them to exercise twenty-five percent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.
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Securities and exchange board of india(substantial acquisitions of shares and takeovers)regulation,2011
• No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights.
ACQUISITION OF CONTROL • Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with the regulations.
OFFER SIZE.
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The open offer for acquiring shares to be made by the acquirer and persons acting in concert with him shall be for at least twenty six percent of total shares of the target company,as of tenth working day from the closure of the tendering period,provided that the total shares of the target company as of tenth working day from the closure of the tendering period shall take into account all potential increases in the number of outstanding shares during the offer period contemplated as of the date of the public announcement.
• In the event the shares accepted in the open offer were such that the shareholding of the acquirer taken together with persons acting in concert with him pursuant to completion of the open offer results in their shareholding exceeding the maximum permissible non-public shareholding, the acquirer shall be required to bring down the non-public shareholding to the level specified and within the time permitted under Securities Contract (Regulation) Rules, 1957.
OFFER PRICE • The open offer for acquiring shares shall be made at a price not lower than the price determined. • The offer price for partly paid up shares shall be computed as the difference between the offer price and the amount due towards callsin-arrears including calls remaining unpaid with interest, if any, thereon.
• The offer price for equity shares carrying differential voting rights shall be determined by the acquirer and the manager to the open offer with full disclosure of justification for the price so determined, being set out in the detailed public statement and the letter of offer: ?Provided that such price shall not be lower than the amount determined by applying the percentage rate of premium
• In the event of any of the price parameters contained in this regulation not being available or denominated in Indian rupees, the conversion of such amount into Indian rupees shall be effected at the exchange rate as prevailing on the date preceding the date of public announcement and the acquirer shall set out the source of such exchange rate in the public announcement, the detailed public statement and the letter of offer.
• Where the acquirer has acquired or agreed to acquire whether by himself or through or with persons acting in concert with him any shares or voting rights in the target company during the offer period, whether by subscription or purchase, at a price higher than the offer price, the offer price shall stand revised to the highest price paid or payable for any such acquisition: ? Provided that no such acquisition shall be made after the third working day prior to the commencement of the tendering period and until the expiry of the tendering period.
MODE OF PAYMENT
The offer price may be paid, — • (a) in cash; • (b) by issue, exchange or transfer of listed shares in the equity share capital of the acquirer or of any person acting in concert; • (c) by issue, exchange or transfer of listed secured debt instruments issued by the acquirer or any person acting in concert with a rating not inferior to investment grade as rated by a credit rating agency registered with the Board; • (d) by issue, exchange or transfer of convertible debt securities entitling the holder thereof to acquire listed shares in the equity share capital of the acquirer or of any person acting in concert; or • (e) a combination of the mode of payment of consideration stated in clause (a), clause (b), clause (c) and clause (d)
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• Where the shareholders have been provided with options to accept payment in cash or by way of securities, or a combination thereof, the pricing for the open offer may be different for each option subject to compliance with minimum offer price requirements : ? Provided that the detailed public statement and the letter of offer shall contain justification for such differential pricing.
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General exemptions
The following acquisitions shall be exempt from the obligation to make an open offer: • immediate relatives; • persons named as promoters in the shareholding pattern filed by ?the target company in terms of the listing agreement or these ?regulations for not less than three years prior to the proposed ?acquisition; • a company, its subsidiaries, its holding company, other subsidiaries ?of such holding company, persons holding not less than fifty per ?cent of the equity shares of such company, other companies in
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OPEN OFFER PROCESS
Manager to the open offer: •
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• Prior to making a public announcement, the acquirer shall appoint a merchant banker registered with the Board, who is not an associate of the acquirer, as the manager to the open offer. • The public announcement of the open offer for acquiring shares required under these regulations shall be made by the acquirer through such manager to the open offer.
Timing: • The public announcement made shall be made on the same day as the date on which the acquirer takes the decision to voluntarily make a public announcement of an open offer for acquiring shares of the target company. • The public announcement referred to in shall be made on the date of agreeing to acquire shares or voting rights in, or control over the target company.
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Publication:
• The public announcement shall be sent to all the stock exchanges on which the shares of the target company are listed, and the stock exchanges shall forthwith disseminate such information to the public. • A copy of the public announcement shall be sent to the Board and to the target company at its registered office within one working day of the date of the public announcement. • Simultaneously with publication of such detailed public statement in the • newspapers, a copy of the same shall be sent to,— • (i) the Board through the manager to the open offer, • (ii) all the stock exchanges on which the shares of the target company • are listed, and the stock exchanges shall forthwith disseminate such • information to the public,
CONTENTS
The public announcement shall contain such information as may be specified, including the following,— • name and identity of the acquirer and persons acting in concert with him; • name and identity of the sellers, if any; • nature of the proposed acquisition such as purchase of shares or allotment of shares, or any other means of acquisition of shares or voting rights in, or control over the target company; • the consideration for the proposed acquisition that attracted the obligation to make an open offer for acquiring shares, and the price per share, if any; • the offer price, and mode of payment of consideration; and • offer size, and conditions as to minimum level of acceptances, if any
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• The detailed public statement pursuant to the public announcement shall contain such information as may be specified in order to enable shareholders to make an informed decision with reference to the open offer. • The public announcement of the open offer, the detailed public statement, and any other statement, advertisement, circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares under these regulations shall not omit any relevant information, or contain any misleading information. •
FILING OF LETTER OF OFFER WITH THE BOARD
• Within five working days from the date of the detailed public statement made , the acquirer shall, through the manager to the open offer, file with the Board, a draft of the letter of offer containing such information as may be specified along with a non-refundable fee, by way of a banker’s cheque or demand draft payable in Mumbai in favour of the Board • In the case of competing offers, the Board shall provide its comments on the draft letter of offer in respect of each competing offer on the same day.
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Conditional offer.
An acquirer may make an open offer conditional as to the minimum level of acceptance: ? Provided that where the open offer is pursuant to an agreement, such agreement shall contain a condition to the effect that in the event the desired level of acceptance of the open offer is not received the acquirer shall not acquire any shares under the open offer and the agreement attracting the obligation to make the open offer shall stand rescinded.
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• Where an open offer is made conditional upon minimum level of acceptances, the acquirer and persons acting in concert with him shall not acquire, during the offer period, any shares in the target company except under the open offer and any underlying agreement for the sale of shares of the target company pursuant to which the open offer is made
Payment of consideration
• For the amount of consideration payable in cash, the acquirer shall open a special escrow account with a banker to an issue registered with the Board and deposit therein, such sum as would, together with cash transferred, make up the entire sum due and payable to the shareholders as consideration payable under the open offer, and empower the manager to the offer to operate the special escrow account on behalf of the acquirer for the purposes under these regulations. • The acquirer shall complete payment of consideration whether in the form of cash, or as the case may be, by issue, exchange or transfer of securities, to all shareholders who have tendered shares in acceptance of the
Completion of acquisition
• The acquirer shall not complete the acquisition of shares or voting rights in, or control over, the target company, whether by way of subscription to shares or a purchase of shares attracting the obligation to make an open offer for acquiring shares, until the expiry of the offer period • The acquirer shall complete the acquisitions contracted under any agreement attracting the obligation to make an open offer not later than twenty-six weeks from the expiry of the offer period
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OBLIGATIONS OF THE ACQUIRER.
• Prior to making the public announcement of an open offer for acquiring shares under these regulations, the acquirer shall ensure that firm financial arrangements have been made for fulfilling the payment obligations under the open offer and that the acquirer is able to implement the open offer, subject to any statutory approvals for the open offer that may be necessary. • Prior to making the public announcement of an open offer for acquiring shares under these regulations, the acquirer shall ensure that firm financial arrangements have been made for fulfilling the payment obligations under the open offer and that the acquirer is able to implement the open offer, subject to any statutory approvals for the open offer that may
• The acquirer and persons acting in concert with him shall not sell shares of the target company held by them, during the offer period. • The acquirer and persons acting in concert with him shall be jointly and severally responsible for fulfillment of applicable obligations under these regulations.
OBLIGATIONS OF THE TARGET COMPANY
• Upon a public announcement of an open offer for acquiring shares of a target company being made, the board of directors of such target company shall ensure that during the offer period, the business of the target company is conducted in the ordinary course consistent with past practice. • The target company shall be prohibited from fixing any record date for a corporate action on or after the third working day prior to the commencement of the tendering period and until the expiry of the tendering period.
• Upon receipt of the detailed public statement, the board of directors of the target company shall constitute a committee of independent directors to provide reasoned recommendations on such open offer, and the target company shall publish such recommendations. • Upon fulfillment by the acquirer, of the conditions required under these regulations, the board of directors of the target company shall without any delay register the transfer of shares acquired by the acquirer in physical form, whether under the agreement or from open market purchases, or pursuant to the open offer.
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doc_205902995.pptx
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TAKEOVER AND TAKEOVER CODES
? ?
Presented by:
TAKEOVER
• Under the MRTP Act,takeover means acquisition of not less than 25% of voting power in a company.A takeover is basically a forced or unwilling acquisition.In this kind of acquisition the management of the “target company” might oppose the move of being taken over.
Generally a takeover is a part of or kind of acquisition. • A takeover takes place when the acquiring firm takes over the control of the target firm. • A takeover does not necessarily entail full,legal control. • A company can have effective control over another company by holding minority ownership. • Section 372 of the Companies Act defines the limit of a company’s investment in the shares of another company.
?
Takeover versus Acquisition
• Takeover generally is hostile and forceful in nature whereas acquisition is a mutual agreement between acquiring and target company. • An unwilling acquisition or takeover may be opposed whereas a mutually agreed acquisition is not opposed(generally).
?
Tender Offer And Hostile Takeover
• A Tender Offer is a formal offer to purchase a given number of a company’s share at a specific price.The acquiring company asks the shareholders of the target company to “tender” their shares in exchange for a specific price. • The price is generally quoted at a premium in order to induce the shareholders to tender their shares. •
Hostile Takeover: • The tender offer may be used without any negotiations,and it may be tantamount to a hostile takeover. • The shareholders are generally approached through announcement in the financial press or through direct communication individually. • Their reaction exclusively depends upon their attitude and sentiment and the difference between the market price and the offered price.
? ? ?
Takeover codes
Takeover codes are basically the set of rules to be followed in case of mergers,acquisitions or any such activity. ?Takeover codes,as such,is the regulatory framework meant for regulating the process of mergers and acquisitions.
?
SUBSTANTIAL ACQUISITION OF SHARES ,VOTING RIGHTS OR CONTROL • No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company, entitle them to exercise twenty-five percent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.
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Securities and exchange board of india(substantial acquisitions of shares and takeovers)regulation,2011
• No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights.
ACQUISITION OF CONTROL • Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with the regulations.
OFFER SIZE.
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The open offer for acquiring shares to be made by the acquirer and persons acting in concert with him shall be for at least twenty six percent of total shares of the target company,as of tenth working day from the closure of the tendering period,provided that the total shares of the target company as of tenth working day from the closure of the tendering period shall take into account all potential increases in the number of outstanding shares during the offer period contemplated as of the date of the public announcement.
• In the event the shares accepted in the open offer were such that the shareholding of the acquirer taken together with persons acting in concert with him pursuant to completion of the open offer results in their shareholding exceeding the maximum permissible non-public shareholding, the acquirer shall be required to bring down the non-public shareholding to the level specified and within the time permitted under Securities Contract (Regulation) Rules, 1957.
OFFER PRICE • The open offer for acquiring shares shall be made at a price not lower than the price determined. • The offer price for partly paid up shares shall be computed as the difference between the offer price and the amount due towards callsin-arrears including calls remaining unpaid with interest, if any, thereon.
• The offer price for equity shares carrying differential voting rights shall be determined by the acquirer and the manager to the open offer with full disclosure of justification for the price so determined, being set out in the detailed public statement and the letter of offer: ?Provided that such price shall not be lower than the amount determined by applying the percentage rate of premium
• In the event of any of the price parameters contained in this regulation not being available or denominated in Indian rupees, the conversion of such amount into Indian rupees shall be effected at the exchange rate as prevailing on the date preceding the date of public announcement and the acquirer shall set out the source of such exchange rate in the public announcement, the detailed public statement and the letter of offer.
• Where the acquirer has acquired or agreed to acquire whether by himself or through or with persons acting in concert with him any shares or voting rights in the target company during the offer period, whether by subscription or purchase, at a price higher than the offer price, the offer price shall stand revised to the highest price paid or payable for any such acquisition: ? Provided that no such acquisition shall be made after the third working day prior to the commencement of the tendering period and until the expiry of the tendering period.
MODE OF PAYMENT
The offer price may be paid, — • (a) in cash; • (b) by issue, exchange or transfer of listed shares in the equity share capital of the acquirer or of any person acting in concert; • (c) by issue, exchange or transfer of listed secured debt instruments issued by the acquirer or any person acting in concert with a rating not inferior to investment grade as rated by a credit rating agency registered with the Board; • (d) by issue, exchange or transfer of convertible debt securities entitling the holder thereof to acquire listed shares in the equity share capital of the acquirer or of any person acting in concert; or • (e) a combination of the mode of payment of consideration stated in clause (a), clause (b), clause (c) and clause (d)
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• Where the shareholders have been provided with options to accept payment in cash or by way of securities, or a combination thereof, the pricing for the open offer may be different for each option subject to compliance with minimum offer price requirements : ? Provided that the detailed public statement and the letter of offer shall contain justification for such differential pricing.
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General exemptions
The following acquisitions shall be exempt from the obligation to make an open offer: • immediate relatives; • persons named as promoters in the shareholding pattern filed by ?the target company in terms of the listing agreement or these ?regulations for not less than three years prior to the proposed ?acquisition; • a company, its subsidiaries, its holding company, other subsidiaries ?of such holding company, persons holding not less than fifty per ?cent of the equity shares of such company, other companies in
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OPEN OFFER PROCESS
Manager to the open offer: •
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• Prior to making a public announcement, the acquirer shall appoint a merchant banker registered with the Board, who is not an associate of the acquirer, as the manager to the open offer. • The public announcement of the open offer for acquiring shares required under these regulations shall be made by the acquirer through such manager to the open offer.
Timing: • The public announcement made shall be made on the same day as the date on which the acquirer takes the decision to voluntarily make a public announcement of an open offer for acquiring shares of the target company. • The public announcement referred to in shall be made on the date of agreeing to acquire shares or voting rights in, or control over the target company.
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Publication:
• The public announcement shall be sent to all the stock exchanges on which the shares of the target company are listed, and the stock exchanges shall forthwith disseminate such information to the public. • A copy of the public announcement shall be sent to the Board and to the target company at its registered office within one working day of the date of the public announcement. • Simultaneously with publication of such detailed public statement in the • newspapers, a copy of the same shall be sent to,— • (i) the Board through the manager to the open offer, • (ii) all the stock exchanges on which the shares of the target company • are listed, and the stock exchanges shall forthwith disseminate such • information to the public,
CONTENTS
The public announcement shall contain such information as may be specified, including the following,— • name and identity of the acquirer and persons acting in concert with him; • name and identity of the sellers, if any; • nature of the proposed acquisition such as purchase of shares or allotment of shares, or any other means of acquisition of shares or voting rights in, or control over the target company; • the consideration for the proposed acquisition that attracted the obligation to make an open offer for acquiring shares, and the price per share, if any; • the offer price, and mode of payment of consideration; and • offer size, and conditions as to minimum level of acceptances, if any
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• The detailed public statement pursuant to the public announcement shall contain such information as may be specified in order to enable shareholders to make an informed decision with reference to the open offer. • The public announcement of the open offer, the detailed public statement, and any other statement, advertisement, circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares under these regulations shall not omit any relevant information, or contain any misleading information. •
FILING OF LETTER OF OFFER WITH THE BOARD
• Within five working days from the date of the detailed public statement made , the acquirer shall, through the manager to the open offer, file with the Board, a draft of the letter of offer containing such information as may be specified along with a non-refundable fee, by way of a banker’s cheque or demand draft payable in Mumbai in favour of the Board • In the case of competing offers, the Board shall provide its comments on the draft letter of offer in respect of each competing offer on the same day.
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Conditional offer.
An acquirer may make an open offer conditional as to the minimum level of acceptance: ? Provided that where the open offer is pursuant to an agreement, such agreement shall contain a condition to the effect that in the event the desired level of acceptance of the open offer is not received the acquirer shall not acquire any shares under the open offer and the agreement attracting the obligation to make the open offer shall stand rescinded.
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• Where an open offer is made conditional upon minimum level of acceptances, the acquirer and persons acting in concert with him shall not acquire, during the offer period, any shares in the target company except under the open offer and any underlying agreement for the sale of shares of the target company pursuant to which the open offer is made
Payment of consideration
• For the amount of consideration payable in cash, the acquirer shall open a special escrow account with a banker to an issue registered with the Board and deposit therein, such sum as would, together with cash transferred, make up the entire sum due and payable to the shareholders as consideration payable under the open offer, and empower the manager to the offer to operate the special escrow account on behalf of the acquirer for the purposes under these regulations. • The acquirer shall complete payment of consideration whether in the form of cash, or as the case may be, by issue, exchange or transfer of securities, to all shareholders who have tendered shares in acceptance of the
Completion of acquisition
• The acquirer shall not complete the acquisition of shares or voting rights in, or control over, the target company, whether by way of subscription to shares or a purchase of shares attracting the obligation to make an open offer for acquiring shares, until the expiry of the offer period • The acquirer shall complete the acquisitions contracted under any agreement attracting the obligation to make an open offer not later than twenty-six weeks from the expiry of the offer period
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OBLIGATIONS OF THE ACQUIRER.
• Prior to making the public announcement of an open offer for acquiring shares under these regulations, the acquirer shall ensure that firm financial arrangements have been made for fulfilling the payment obligations under the open offer and that the acquirer is able to implement the open offer, subject to any statutory approvals for the open offer that may be necessary. • Prior to making the public announcement of an open offer for acquiring shares under these regulations, the acquirer shall ensure that firm financial arrangements have been made for fulfilling the payment obligations under the open offer and that the acquirer is able to implement the open offer, subject to any statutory approvals for the open offer that may
• The acquirer and persons acting in concert with him shall not sell shares of the target company held by them, during the offer period. • The acquirer and persons acting in concert with him shall be jointly and severally responsible for fulfillment of applicable obligations under these regulations.
OBLIGATIONS OF THE TARGET COMPANY
• Upon a public announcement of an open offer for acquiring shares of a target company being made, the board of directors of such target company shall ensure that during the offer period, the business of the target company is conducted in the ordinary course consistent with past practice. • The target company shall be prohibited from fixing any record date for a corporate action on or after the third working day prior to the commencement of the tendering period and until the expiry of the tendering period.
• Upon receipt of the detailed public statement, the board of directors of the target company shall constitute a committee of independent directors to provide reasoned recommendations on such open offer, and the target company shall publish such recommendations. • Upon fulfillment by the acquirer, of the conditions required under these regulations, the board of directors of the target company shall without any delay register the transfer of shares acquired by the acquirer in physical form, whether under the agreement or from open market purchases, or pursuant to the open offer.
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doc_205902995.pptx