By P K Pandya & Co. Practising Company Secretaries By P K
Pandya & Co. Practising Company Secretaries
Slide 2
SEBI SAST 1994 Quick Fix SEBI SAST 1997Transition SEBI SAST
2011Transformation P K Pandya & Co.
Slide 3
Definitions Convertible Security means a security which is
convertible into or exchangeable with equity shares of the issuer
at a later date, with or without the option of the holder of the
security, and includes convertible debt instruments and convertible
preference shares. Enterprise Value means the value calculated as
market capitalization of a company plus debt, minority interest and
preferred shares, minus total cash and cash equivalents Identified
date means the date falling on the tenth working day prior to the
commencement of the tendering period, for the purposes of
determining the shareholders to whom the letter of offer shall be
sent P K Pandya & Co.
Slide 4
Frequently traded shares means shares of a target company in
which the traded turnover on any stock exchange during the twelve
calendar months preceding the calendar month in which the public
announcement is made, is at least ten per cent of the total number
of shares of such class of such target company: Provided that where
the total share capital of the target company is not identical
throughout such period, the weighted average number of total shares
of the target company shall represent the total number of shares.
Immediate Relative means any spouse of a person, and includes
parent, brother, sister or child of such person or of the spouse.
Tendering Period means the period within which shareholders may
tender their shares in acceptance of an open offer to acquire
shares made under these regulations; P K Pandya & Co.
Slide 5
Offer Period means the period between the date of entering into
an agreement, formal or informal, to acquire shares, voting rights
in, or control over a target company requiring a public
announcement, or the date of the public announcement, as the case
may be, and the date on which the payment of consideration to
shareholders who have accepted the open offer is made, or the date
on which open offer is withdrawn, as the case may be. Shares means
shares in the equity share capital of a target company carrying
voting rights, and includes any security which entitles the holder
thereof to exercise voting rights; Explanation. For the purpose of
this clause shares will include all depository receipts carrying an
entitlement to exercise voting rights in the target company; P K
Pandya & Co.
Slide 6
Additions to Persons Acting in Concert:- Promoters and members
of the promoter group. Immediate relatives. A collective investment
scheme and its collective investment management company, trustees
and trustee company. Associate Means:- any immediate relative of
such person; trusts of which such person or his immediate relative
is a trustee; partnership firm in which such person or his
immediate relative is a partner; and members of Hindu undivided
families of which such; person is a coparcener; P K Pandya &
Co.
Slide 7
Promoter has the same meaning as in the Securities and Exchange
Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009 and includes a member of the promoter group.
Promoter Group has the same meaning as in the Securities and
Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009. Volume Weighted Average Market
Price means the product of the number of equity shares traded on a
stock exchange and the price of each equity share divided by the
total number of equity shares traded on the stock exchange. Volume
Weighted Average Price means the product of the number of equity
shares bought and price of each such equity share divided by the
total number of equity shares bought. P K Pandya & Co.
Slide 8
Example Volume Weighted Average Market price Sr. No No. of
shares traded(A) Market Price per share (B) Product of (A) and (B)
12005001,00,000 23006672,00,100 35008984,49,000 47004503,15,000
56009995,99,400 TOTAL2,300 16,63,500 Volume Weighted Average Market
price = Product of (A and B) /Total of A =1663500/2300 =Rs.723.26 P
K Pandya & Co.
Slide 9
Weighted Average Number Of Total Shares means the number of
shares at the beginning of a period, adjusted for shares cancelled,
bought back or issued during the aforesaid period, multiplied by a
time-weighing factor. Example Weighted Average No. of Shares
200,000 shares of A Limited were outstanding as 1 st April, 2011.
The Company issued 100,000 equity shares on 1 st Oct, 2011.
Weighted Average No. of shares outstanding during the year = {[12 x
200,000] + [100,000 x 6]} / 12 = 250,000. P K Pandya & Co.
Slide 10
Modes Of Acquisition Direct Acquisition of Shares. Indirect
Acquisition of Shares Direct Acquisition of Control. Indirect
Acquisition of Control. P K Pandya & Co.
Slide 11
Direct Acquisition of Shares and Control Initial Trigger limits
have been raised from 15% to 25% Multiple triggers at 55% & 75%
have been done away Creeping acquisition limit has been retained at
5% Creeping acquisition can be done at the rate of 5% every year
till the holdings reach 75% Open offer has been made mandatory when
there is change in control. Exemption by passing a special
resolution has been done away P K Pandya & Co.
Slide 12
Following Explanations have been added:- Gross acquisitions
alone shall be taken into account regardless of any intermittent
fall in shareholding or voting rights whether owing to disposal of
shares held or dilution of voting rights owing to fresh issue of
shares by the target company. Example Mr. A holds 20% and his wife
holds 10 % of Equity Share capital of ABC Ltd as on 31 st March
2010. Mr. A acquires additional 2 % on 1 st September, 2010 and
another 3 % on 31 st December, 2010. He sold 4 % of his shares on
31 st January, 2011 in open market. He wants to acquire another 2%
on 1 st March, 2011. Can he do the same? Yes, But he will have to
make an open offer. P K Pandya & Co.
Slide 13
In the case of acquisition of shares by way of issue of new
shares by the target company or where the target company has made
an issue of new shares in any given financial year, the difference
between the pre-allotment and the post-allotment percentage voting
rights shall be regarded as the quantum of additional acquisition.
Case 1 XYZ Ltd has 1,00,000 shares outstanding in the market. Mr. A
holds 30,000 shares. The company makes a further issue of 10,000
shares. Mr. A is allotted 5000 Shares and remaining 5000 are
allotted to a FII. Calculate the % of additional acquisition by Mr.
A. P K Pandya & Co.
Slide 14
Pre Allotment Holding -30% Post Allotment Holding - 31.81%
{(35,000/110,000)*100} Additional Acquisition - 1.81% Case 2
Suppose in Case 2 above Mr. A acquires 3000 shares prior to above
allotment. Calculate the % of additional acquisition by Mr. A. Pre
Allotment Holding - 33% Post Allotment Holding - 34.54%
{(38,000/110,000)*100} Additional Acquisition - 1.54% So total
additional Acquisition during the year is 3% {(3,000/100,000)*100}
+1.54% = 4.54% P K Pandya & Co.
Slide 15
It has been further stated in Regulation 3(3) that:- For the
purposes of sub-regulation (1) and sub-regulation (2), acquisition
of shares by any person, such that the individual shareholding of
such person acquiring shares exceeds the stipulated thresholds,
shall also be attracting the obligation to make an open offer for
acquiring shares of the target company irrespective of whether
there is a change in the aggregate shareholding with persons acting
in concert. Case 1 Mrs. A holds 10% and Mr. A holds 22% of Equity
Share capital of ABC Ltd as on 31 st March 2010. He acquires
additional 4 % from Mrs. A. Whether he will have to make an open
offer? P K Pandya & Co.
Slide 16
Mr. A will have to make a PA as his individual holding
increases beyond 25%. Case 2 Suppose Mr. A has 18 % Shares of ABC
Ltd instead of 22%. He acquires additional 5.1 % from Mrs. A.
Whether he will have to make an open offer? Mr. A will have to make
a PA as his individual holding increases beyond 5% creeping
acquisition limit during the year. P K Pandya & Co.
Slide 17
INDIRECT ACQUISITION OF SHARES OR CONTROL 5. (1) For the
purposes of regulation 3 and regulation 4, acquisition of shares or
voting rights in, or control over, any company or other entity,
that would enable any person and persons acting in concert with him
to exercise or direct the exercise of such percentage of voting
rights in, or control over, a target company, the acquisition of
which would otherwise attract the obligation to make a public
announcement of an open offer for acquiring shares under these
regulations, shall be considered as an indirect acquisition of
shares or voting rights in, or control over the target company P K
Pandya & Co.
Slide 18
Case 1 H Ltd owns 60% of Equity Shares of T ltd. Mr. A owns 5%
and Mrs. A holds 10% equity shares in T ltd. Mr. A acquires 20%
stake in H Ltd. Whether he will have to make an open offer? No, he
will not have to make an open offer. As 20% stake is a minority
stake which does not enable the holder to influence the decisions
of H Ltd. It does not enable him to exercise voting rights over T
Ltd. Case 2 Mr. A owns 5% and Mrs. A holds 10% equity shares in T
ltd. Mr. A acquires 60% of Shareholding in Z Ltd which owns 12% in
T Ltd. Will he be required to make an open offer? Yes, he will have
to make an open offer. As 60% stake is a majority stake which
enables the holder to influence the decisions of Z Ltd. It enables
him to exercise voting rights of 27% over T Ltd. P K Pandya &
Co.
Slide 19
5 (2) Notwithstanding anything contained in these regulations,
in the case of an indirect acquisition attracting the provisions of
sub-regulation (1) where, the proportionate net asset value of the
target company as a percentage of the consolidated net asset value
of the entity or business being acquired; the proportionate sales
turnover of the target company as a percentage of the consolidated
sales turnover of the entity or business being acquired; or the
proportionate market capitalisation of the target company as a
percentage of the enterprise value for the entity or business being
acquired; is in excess of eighty per cent, on the basis of the most
recent audited annual financial statements, such indirect
acquisition shall be regarded as a direct acquisition of the target
company for all purposes of these regulations including without
limitation, the obligations relating to timing, pricing and other
compliance requirements for the open offer. P K Pandya &
Co.
Slide 20
XYZ is an unlisted company. Its owns 51% in A Ltd a Listed
Company(Target). The Consolidated Turnover of XYZ Ltd is Rs. 3000
Crores and the Consolidated NAV is Rs. 1000 Crores. The Standalone
Sales turnover of A Ltd is 2500 and its standalone NAV is 850
Crores. Proportionate NAV of A Ltd as a percentage of the
consolidated NAV of XYZ Ltd is 85.00%(850/1000 x 100).
Proportionate Sales of A Ltd as a percentage of the consolidated
sales of XYZ Ltd is 83.33% (2500/3000 x 100). Hence this
acquisition shall be Deemed as direct acquisition of A Ltd and
hence all the requirement for direct acquisition shall be
applicable. P K Pandya & Co.
Slide 21
Voluntary Offer The acquirer together with PAC must hold 25% or
more equity shares or voting rights. The acquirer or PAC should not
have acquired any shares by creeping acquisition or by any mode
which is exempted during the 52 weeks preceding the PA. However he
can acquire shares by way of Bonus or Stock Split or an open offer.
The open offer shall be for minimum of 10% of outstanding shares.
Compliances to be made if a voluntary open offer is made:- 1. The
acquirer shall not acquire any shares during the open offer
otherwise than under the open offer. 2. The acquirer cannot acquire
any shares for a period of six months after completion of open
offer. However he can make another Voluntary offer or make a
competing offer during the said period. P K Pandya & Co.
Slide 22
Disclosure Requirements Regulation 28 - 1. The disclosures
under this Chapter shall be of the aggregated shareholding and
voting rights of the acquirer or promoter of the target company or
every person acting in concert with him. 2. For the purposes of
this Chapter, the acquisition and holding of any convertible
security shall also be regarded as shares, and disclosures of such
acquisitions and holdings shall be made accordingly. 3. For the
purposes of this Chapter, the term encumbrance shall include a
pledge, lien or any such transaction, by whatever name called. 4.
Upon receipt of the disclosures required under this Chapter, the
stock exchange shall forthwith disseminate the information so
received. P K Pandya & Co.
Slide 23
Event Based Disclosures Initial disclosure shall be made when
aggregate shareholding of acquirer along with PACs reaches 5%. Once
the holding crosses 5% every purchase and sale of aggregating to 2%
shall have to be disclosed. Disclosure is to be made within 2
working days to the stock exchange and the target company. Creation
of pledge or any other encumbrance shall be treated as acquisition
and release of such pledge or encumbrance shall be treated as
disposal and disclosures shall have to be made accordingly. However
Scheduled Commercial Banks and PFIs are exempt form disclosure
requirements if they act as as pledgee in connection with a pledge
of shares for securing indebtedness in the ordinary course of
business. P K Pandya & Co.
Slide 24
Case 1: Mr. A acquires 2% shares or voting rights of T Limited
on 01/11/2011 which taken together with 4% shares or voting rights
already held by him OR in association with Mr. P, aggregates to
more than 5% shares of T Limited. Then Mr. A and Mr. P needs to
disclose their aggregate shareholding and voting rights to T
Limited and BSE (where it is listed) on or before 03/11/2011 in the
format Annexure A given by SEBI in Circular no. SEBI/CFD/DCR/SAST/
2/2011/10/20 dated 20/10/2011. Case 2: Mr. A along with Mr. P holds
6% (5% or more) shares or voting rights of T Limited. On 01/11/2011
Mr. A acquires 2% shares or voting rights of T Limited. Then Mr. A
shall disclose such acquisition of 2 % shares to T Limited and BSE
(where it is listed) on or before 03/11/2011 in the format Annexure
B given by SEBI in Circular no. SEBI/CFD/DCR/SAST/ 2/2011/10/20
dated 20/10/2011. P K Pandya & Co.
Slide 25
Case 3: On 01/11/2011 Mr. X holding 10% shares in T Limited
pledges 3% of his shares (shares taken by way of encumbrance shall
be treated as an acquisition) to Mr. A already holding 6% shares in
T Limited. Then Mr. A shall disclose such acquisition and Mr. X
such disposal (by way of encumbrance) of 3 % shares to T Limited
and BSE (where it is listed) on or before 03/11/2011 in the format
Annexure B given by SEBI in Circular no. SEBI/CFD/DCR/SAST/
2/2011/10/20 dated 20/10/2011. P K Pandya & Co.
Slide 26
Continual Disclosures These disclosures to be made by every
person which together with PACs hold more than 25% of shares or
voting rights in the target company and also the promoters of
target company. They have to disclose their aggregate shareholding
and voting rights as of the thirty-first day of March, in the
Target Company. Disclosure to be made within 7 working days from
the end of Financial Year to every stock Exchange where the shares
of the Company are listed and to the Company. Case 1: As on
31/03/2011 Mr. A together with Mr. P holds shares of T Limited
which entitles them to exercise more than 25% voting right in T
Limited. P K Pandya & Co.
Slide 27
They shall disclose their aggregate shareholding and voting
rights within seven working days from 31/03/2011 to BSE and T
Limited. Case 2: Mr. XYZ, is a Promoter of T Ltd. He and members of
promoter Group and PACs, shall disclose their aggregate
shareholding and voting rights as on 31/03/2011 to BSE and T
Limited within seven working days from 31/03/2011. P K Pandya &
Co.
Slide 28
Disclosure of shares encumbered by Promoters Every encumbrance
of shares of target company by Promoters and PACs shall have to be
disclosed. Disclosure shall be made at the time of creation,
invocation or release of encumbrance. Disclosure to be made within
7 working days from creation, invocation or release of encumbrance
to every stock Exchange where the shares of the Company are listed
and to the Company. P K Pandya & Co.
Slide 29
Role of Company Secretary of a Listed Company Identify and
Categorise:- o Promoter o Promoter group o Person in control o
Persons acting in concert o Associates o Immediate Relatives Ensure
that timely disclosures are made by your promoters, members of
Promoter Group and PACs. Monitor the holdings of promoters, members
of Promoter Group and PACs and take necessary action as required. P
K Pandya & Co.
Slide 30
Ensure that timely intimation is sent to stock exchanges in
respects of transfers exempt under regulation 10. Ensure that
timely reports are filed in respect of transfers exempt under
Regulation 10 with Stock Exchanges and SEBI, if applicable. P K
Pandya & Co.
Slide 31
Role of Company Secretary of an Acquirer Conduct due diligence
on the target company. Check if provisions of Competition Act would
apply and if applicable take action accordingly. Consider all modes
of acquisition permissible and advise the management accordingly on
the best way to execute the transaction. Thoroughly examine the
takeover regulations and make a checklist and timeline for
compliances. Assist the management in appointment of competent
Merchant Bankers and other intermediaries. Ensure that requisite
approvals under Sec 372 and 293 and other applicable provisions of
the Companies Act, 1956 are in place. P K Pandya & Co.
Slide 32
Ensure that the pricing guidelines are complied with. Ensure
that the requisite funds are kept ready and back up funding options
are also in place. Ensure that the obligations of the acquirer as
specified in the regulations are complied with. Since a lot of
information such as pricing etc will become available at the last
moment, its is likely to be a very high pressure exercise. Hence it
is very important for the CS to maintain his cool and ensure that
none of the requirements are missed. P K Pandya & Co.
Slide 33
Role of Company Secretary of a Target Ensure that the
obligations of the target as specified in the regulations are
complied with. To advise the directors not to sell, transfer,
encumber, or otherwise dispose off substantial assets of the
company or its subsidiaries or issue or allot shares during the
offer period unless a special resolution by postal ballot is
passed. Place the copy of PA and Letter of offer before the board.
To furnish the list of shareholders to the acquirer Help the Board
in sending the recommendation on open offer Help the acquirer in
verification of shares tendered in acceptance of open offer. P K
Pandya & Co.
Slide 34
Offer Size The offer size under regulation 3 and regulation 4
shall be for at least twenty six per cent of total shares of the
target company, as of tenth working day from the closure of the
tendering period. Obligation has been placed on the acquire to 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. If there is an increase in total number of
shares, after the public announcement, which is not contemplated on
the date of the public announcement then the offer size shall be
proportionately increased. P K Pandya & Co.
Slide 35
Example:- Mr. A wants to acquire 25% of equity share capital of
T Ltd. He has made a public announcement on 1 st October, 2011. The
tendering period is from 1 st November to 16 th November, 2011. T
ltd has 100,000 equity shares outstanding as on 1 st October, 2011.
The Company also has 10,000 Compulsorily Convertible Debentures
outstanding against which 5,000 equity shares will have to be
issued. They are due for conversion on 17 th November, 2011 and
shares will have to be issued immediately. Mr. A will have to make
an open offer. The minimum size of the open offer shall be 26%
total shares of the target company. The 26% shall be calculated on
the enhanced no of shares i.e 1,05,000. Hence he will have to make
an open offer for 27300 shares. P K Pandya & Co.
Slide 36
The Size of the voluntary shall be minimum 10% and shall not
exceed such amount as would result in the post-acquisition holding
of the acquirer and PACs exceeding the maximum permissible
nonpublic shareholding. If an competing offer is made against the
Voluntary offer then the size of Voluntary offer can be increased
to such amount as the first acquirer deems fit. This increase in
the size of offer has to be made within 15 working days from the PA
of competing offer, failing to which he cannot increase the size.
Once the size of voluntary offer is increased it will cease to be a
voluntary offer and be considered a open offer under regulation
3(2). the acquirer, PACs and the parties to any underlying
agreement including deemed PACs of such parties cannot tender their
shares in any open offer. P K Pandya & Co.
Slide 37
Minimum Price for Direct Acquisition 8(1)The Minimum offer
price shall be the highest of following:- the highest negotiated
price per share of the target company for any acquisition under the
agreement attracting the obligation to make a public announcement
of an open offer; the volume-weighted average price paid or payable
for acquisitions, whether by the acquirer or by any person acting
in concert with him, during the fifty-two weeks immediately
preceding the date of the public announcement; the highest price
paid or payable for any acquisition, whether by the acquirer or by
any person acting in concert with him, during the twenty six weeks
immediately preceding the date of the public announcement; the
volume-weighted average market price of such shares for a period of
sixty trading days immediately preceding the date of the public
announcement as traded on the stock exchange where the maximum
volume of trading in the shares of the target company are recorded
during such period, provided such shares are frequently traded; P K
Pandya & Co.
Slide 38
where the shares are not frequently traded, the price
determined by the acquirer and the manager to the open offer taking
into account valuation parameters including, book value, comparable
trading multiples, and such other parameters as are customary for
valuation of shares of such companies; and the per share value
computed under sub-regulation (5), if applicable. Example Mr A
wants to take over CBB Ltd a Listed Company. CBB Ltd has
10,00,00,000 shares outstanding. He purchased shares of CBB Ltd on
as per details presented in the table given below. Some purchases
were made on stock exchange and some of them were made on privately
form other shareholders P K Pandya & Co.
Slide 39
Date of Acquisition Price Paid per share No of Shares Acquired
15/03/201050015,00,000 15/04/20105505,00,000 15/05/201065010,00,000
15/06/201045025,00,000 15/07/20107005,00,000 17/08/201075010,00,000
12/09/20104705,00,000 06/10/20105905,00,000 09/11/201064010,00,000
09/12/201090010,00,000 Total 1,00,00,000 P K Pandya & Co.
Slide 40
He enters in to an agreement with Mr. H who holds 16% shares of
CBB Ltd on 15 th March, 2011 to purchase his entire shareholding at
the rate of 850 per share. The shares of CBB ltd are frequently
traded. The public announcement was made on 1 st April, 2011.
Calculate the minimum price payable in the open offer. The Minimum
open offer price shall be the Highest of following:- Rs.850 agreed
to be paid to Mr. H. Rs. 900 being the highest price paid for any
acquisition during the twenty six weeks immediately preceding the
date of the public announcement. (Since 01/10/2010) Rs. 750 being
the volume-weighted average market price of such shares for a
period of sixty trading days immediately preceding the date of the
public announcement. Rs.764 being the Volume - weighted average
price paid for acquisitions during 52 weeks preceding the date of
Public Announcement. P K Pandya & Co.
Slide 41
Date of Acquisition Price Paid per share(A) No of Shares
Acquired (B) Product (A x B) 15/04/20105505,00,000 27,50,00,000
15/05/201065010,00,000 65,00,00,000 15/06/201045025,00,000
1,12,50,00,000 15/07/20107005,00,000 35,00,00,000
17/08/201075010,00,000 75,00,00,000 12/09/20104705,00,000
23,50,00,000 06/10/20105905,00,000 29,50,00,000
09/11/201064010,00,000 64,00,00,000 09/12/201090010,00,000
90,00,00,000 15/03/20118501,60,00,000 13,60,00,00,000 Total
2,45,00,00018,82,00,00,000 P K Pandya & Co.
Slide 42
VWAP = 18,82,00,00,000/2,45,00,000 = 764 So the minimum price
will be Rs. 900 per share. The Conditions for minimum price in case
of Indirect Acquisitions are also same. However one additional
criteria has been prescribed which is as follows:- the highest
price paid or payable for any acquisition, whether by the acquirer
or by any person acting in concert with him, 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 the
public announcement of the open offer for shares of the target
company made under these regulations. Also the cut off date is date
of contract or the date on which the intention or the decision to
make the primary acquisition is announced in the public domain
instead of date of PA. P K Pandya & Co.
Slide 43
8(5)In the case of an indirect acquisition and open offers
under sub-regulation (2) of regulation 5 where, the proportionate
net asset value of the target company as a percentage of the
consolidated net asset value of the entity or business being
acquired; the proportionate sales turnover of the target company as
a percentage of the consolidated sales turnover of the entity or
business being acquired; or the proportionate market capitalization
of the target company as a percentage of the enterprise value for
the entity or business being acquired; is in excess of fifteen per
cent, on the basis of the most recent audited annual financial
statements, the acquirer shall, notwithstanding anything contained
in sub-regulation (2) or sub-regulation (3), be required to compute
and disclose, in the letter of offer, the per share value of the
target company taken into account for the acquisition, along with a
detailed description of the methodology adopted for such
computation. P K Pandya & Co.
Slide 44
Example. Astra Inc is a company incorporated in USA, It has a
Subsidiary in India by the name of Astra India Limited which is
listed on BSE and NSE. Vertigo Inc. acquires 51% in Astra Inc for
$6,000. The Consolidate NAV of Astra Inc is $4,000 Crores,
Consolidated Sales is $8000 croresand Market Capitalization is
$10,000 Crores. NAV of Astra India is $1,000 Crores, Sales are $
3000 Crores and Market Capitalization is $3,000 Crores. Since there
is an indirect acquisition of Astra India, Vertigo will have to
make a open offer in India. Since the Proportionate NAV, sales and
Market Cap of Astra India as a percentage of the consolidated NAV,
sales and Market Cap of Astra INC is 25%, 37.5% and 30%
respectively the provisions of this sub regulation are attracted.
Hence Vertigo Inc is required to compute and disclose, in the
letter of offer, the per share value ascribed to Astra India when
determining the price for acquisition of Astra Inc, along with a
detailed description of the methodology adopted for such
computation. P K Pandya & Co.
Slide 45
Additional Pricing Provisions 8(6)If the acquirer or any PAC
has any outstanding convertible instruments convertible into shares
of the target company at a specific price, the price at which such
instruments are to be converted into shares, shall also be
considered. 8(7) The price paid for shares of the target company
shall include control premium or as non-compete fees or any other
fee. 8(8)Where the acquirer has acquired or agreed to acquire
whether by himself or through or with PACs 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. P K Pandya & Co.
Slide 46
8(10) Where the acquirer or persons acting in concert with him
acquires shares of the target company during the period of
twenty-six weeks after the tendering period at a price higher than
the offer price under these regulations, the acquirer and persons
acting in concert shall pay the difference between the highest
acquisition price and the offer price, to all the shareholders
whose shares were accepted in the open offer, within sixty days
from the date of such acquisition: Provided that this provision
shall not be applicable to acquisitions under another open offer
under these regulations or pursuant to the Securities and Exchange
Board of India (Delisting of Equity Shares) Regulations, 2009, or
open market purchases made in the ordinary course on the stock
exchanges, not being negotiated acquisition of shares of the target
company whether by way of bulk deals, block deals or in any other
form. P K Pandya & Co.
Slide 47
8(11) Where the open offer is subject to a minimum level of
acceptances, the acquirer may, subject to the other provisions of
this regulation, indicate a lower price, which will not be less
than the price determined under this regulation, for acquiring all
the acceptances despite the acceptance falling short of the
indicated minimum level of acceptance, in the event the open offer
does not receive the minimum acceptance. 8(12) In the case of any
indirect acquisition, other than the indirect acquisition referred
in sub-regulation (2) of regulation 5, the offer price shall stand
enhanced by an amount equal to a sum determined at the rate of ten
per cent per annum for the period between the earlier of the date
on which the primary acquisition is contracted or the date on which
the intention or the decision to make the primary acquisition is
announced in the public domain, and the date of the detailed public
statement, provided such period is more than five working days.
8(13) The offer price for partly paid up shares shall be computed
as the difference between the offer price and the amount due
towards calls- in-arrears including calls remaining unpaid with
interest, if any, thereon. P K Pandya & Co.
Slide 48
8(14)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, if any, that the offer price for the equity shares
carrying full voting rights represents to the price parameter
computed under clause (d) of sub-regulation 2, or as the case may
be, clause (e) of sub-regulation 3, to the volume-weighted average
market price of the shares carrying differential voting rights for
a period of sixty trading days computed on the same terms as
specified in the aforesaid provisions, subject to shares carrying
full voting rights and the shares carrying differential voting
rights, both being frequently traded shares. P K Pandya &
Co.
Slide 49
Example ABC Limited has 2 classes of Equity shares namely
Ordinary Equity Shares and DVRs. The open offer price of Ordinary
shares in Rs. 130 per share. The 60 Days VWAMP of ordinary shares
is Rs. 100 per share and for DVRs Rs. 50 per share. Calculate the
minimum offer price for DVRs. The offer price of ordinary shares is
at a 30% premium to its 60day VWAMP. Hence the minimum price for
DVRs will be Rs. 65. 8(16)For purposes of clause (e) of
sub-regulation (2) and sub- regulation (4), the Board may, at the
expense of the acquirer, require valuation of the shares by an
independent merchant banker other than the manager to the open
offer or an independent chartered accountant in practice having a
minimum experience of ten years. P K Pandya & Co.