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TAKE-OVERS I

MEANING, FORMS
A takeover involves the acquisition of a certain block of equity capital of a company which enables the acquirer to exercise control over the affairs of the company It means a change of controlling interest in a company through acquisition of shares by another group

STEPS IN ACQUISITION
Acquiring company Acquirer Acquired company Target STEPS: 1.Deciding the inorganic growth strategy implemented 2.Search and screen the possible targets 3.Investigate and value the target 4.Evaluate the sources of finances

FORMS OF TAKEOVER
Open market purchase/ Hostile the acquirer buys the shares of the listed company in the stock market Negotiated acquisition The acquirer buys shares of the target co. from one or more existing shareholders in a negotiated transaction Preferential allotment The acquirer buys shares of target co

FORMS.
Through preferential allotment of equity shares Bail-out When a profit making company takes over financially sick co. to bail it out

TAKEOVER CODE OF SEBI

I Listing Agreement Regulatory Clauses 40A, 40B of listing agreement 40A minimum level of public shareholding (25%) 40B requirements of takeover to be met

TAKEOVER CODE
II Disclosure of shareholding and control in Listed companies Intimation to Target co. An acquirer of shares holds in excess of 5%/10%/14%/54%/74%, is required to disclose at every stage within 2 days of allotment of shares Control 1.Right to appoint majority of the directors

TAKEOVER CODE.
2. To control the management 3.To policy exercisable by persons acting individually in concert Persons acting in concert persons who cooperate for substantial acquisition of shares / voting rights to gain control over the target company

TAKEOVER CODE
III Substantial acquisition of shares Acquisition of 15% of shares / voting rights of any company Consolidation of holdings 1. Any acquirer holds from 15% - 55% any additional acquisition of 5% or more must make a public announcement 2. More than 55% - 75% - any additional shares acquisition public

TAKE OVER CODE


3. If target company has listed shares (at least 10% of offer to the public) in this case between 55% - 90% - any additional shares purchase public announcement is a must 4. In case of Divestment (Government holdings of 50% or more) only one public announcement is sufficient

TAKEOVER CODE
IV Appointment of Merchant Banker The acquirer has to appoint MB before making public offer V Public Announcement of offer It should be made within 4 days of entering into agreement with the target co. In case of Indirect acquisition within 3 months of such acquisition

TAKEOVER CODE

Offer letter sent to the shareholders within 21 days from submission to SEBI Specified date the date for the purpose of determining the names of shareholders to whom the letter of offer would be sent Offer price payable in a. cash b. issue/transfer of shares of acquirer c. issue / transfer of secured instruments

TAKEOVER CODE
Public announcement of offer in 3 newspapers Eng, Hindi, Regional language Copies SEBI, all SEs, target company VI Submission of Letter of offer to SEBI a. the acquirer before public announcement submit the draft letter of offer to SEBI within 14 days of

TAKEOVER CODE.
Offer period the period between the date of entering into MOU / public announcement and the date of completion of offer formalities Obligations of the Acquirer Send offer letter to all shareholders, custodians of GDR/ADR, holders of convertibles within 45 days of public announcement

TAKEOVER CODE
Payment

within 30 days of closure of offer to the accepted shareholders If failed to pay, penal interest to be paid In case of withdrawal, the acquirer should not any offer of acquisition of shares in the target company: 1. For 6 months from the date of announcement of withdrawal and 2. 12 months from the date of closure of offer

TAKEOVER CODE
Obligations of the BOD of Target company With the approval of shareholders in general meeting and public announcement the BOD can not : I. Dispose assets II. Issue capital III. Enter into material contracts IV. Appoint additional directors

TAKEOVER CODE
Competitive bids Within 21 days of public announcement by any other acquirer other than the acquirer who made public announcement Provision of Escrow The acquirer deposits cash in Escrow a/c Deal value is Rs.100 crores 25% deposit

TAKEOVER CODE
Deposits consist of cash, bank guarantees, deposits of acceptable securities PENALTIES OF NON-COMPLIANCE Forfeiture of part or full sum in Escrow a/c Failure of intermediaries suspension or cancellation of registration

TAKEOVER CODE.
Misstatement of material information BOD, merchant bankers liable a. criminal prosecution b. monetary penalties c. directions under the SEBI act d. cease and desist order proceedings e. adjudication proceedings Any aggrieved party on the order of SEBI may appeal to Securities Appallate Tribunal