SEBI to dilute open offer norms in mergers and acquisitions

The Securities and Exchange Board of India (SEBI) is likely to approve a diluted version of the draft takeover code aimed at overhauling India’s corporate acquisition regime. The market regulator is likely to bring down the mandatory open offer to 51% of the total shares from the recommended 100%, a Source said on the condition of anonymity.

The recommendation came from a panel headed by former Securities Appellate Tribunal (SAT) chairman C Achuthan.
SEBI will take up the matter in its board meeting later this month.

In July last year, the Achutan panel had recommended increasing the threshold for an open offer to 25% from the current 15%.

Besides, the panel also recommended that the acquirer will have to make an open offer to buy 100% of a target company’s shares against the current 20%.

The extent of the open offer that an acquirer would mandatorily need to make is a critical area. SEBI’s proposal to make an open offer for the entire 75% after the open offer trigger could result in a delisting of the target firm, sources said. “It may be made mandatory for an acquirer to disclose upfront whether it plans to delist a company after acquiring it.”

According to a government directive last year, every listed entity is required to maintain a minimum public shareholding of 25%. For companies that currently do not comply with this rule, promoters are required to bring down their stake by at least 5% every year till their holding comes down to 75%. (Hindustan Times)