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11/09/2012
LOGO
Overview of Regulations
SEBI Takeover Regulations, 2011
Chapter I Preliminary
Chapter II Substantial Acquisition of Shares, Voting Rights or Control Provides threshold limit for open offers and exemptions
Key Definitions
Regulation 1-2
Regulation 3 - 11
Regulation 12 - 23
Regulation 24 - 27
Regulation 28 - 31
Regulation 32 - 35
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BASIC CONCEPT
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Rights or
Company
Shares
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Key Definitions
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ACQUIRER
Who
Directly Acquires Or Or Whether Or through By Himself Or with Shares Or Voting rights Over
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With PACs
Or
Control
Target Company
ACQUISITION
means
Directly
Acquiring
OR
OR
Indirectly
Agreeing to Acquire
Shares
OR
Voting Rights
OR
Control
Target Company
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ACQUIRER
Who
Directly Acquires Or Or Whether Or through By Himself Or with Shares Or Voting rights Over
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With PACs
Or
Control
Target Company
CONTROL
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UNANSWERED ISSUE
Meaning of Term Negative Control and the applicability of SEBI Takeover Regulations on the same? Exemption Rejected in the matter of acquisition of shares of Daikaffil Chemicals India Limited (Order dated 14.02.2007) Acquirer Proposes to acquire 25.10% voting rights through Preferential
Allotment.
Increase in shareholding from Nil to 25.10%. Exemption Rejected as the acquirer will acquire Negative Control over the Company.
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SHARES
Means
capital
carrying
Includes
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Security which entitles the holder to exercise voting rights Depository receipts carrying an entitlement to exercise voting rights
10%
Trading Turnover
For instance: Month of PA: September 2012 Trading Turnover: September 2011 to August 2012
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IDENTIFIED DATE
Identified Date
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IMPORTANT EVENTS
Offer Period
Identified Date
Te n d e r i n g Period
10 working days within which shareholders tender their shares
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objective acquire
ENTERPRISE VALUE*
means
value calculated as
Market Capitalization of a Company
Debt
Minority Interest
Preferred shares
Total Cash
Cash Equivalents
ENTERPRISE VALUE
1 Minority Interest
A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company.
Cash equivalent
Investment securities that are short-term, have high credit quality and are highly liquid.
Preferred stock Click to add Title a specific dividend that is Capital stock which provides
paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. E.g. Preference Shares
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ENTERPRISE VALUE
Paid up capital (No. of shares) (1) Closing Price of preceding day (2) Market Capitalization (3=1*2) Debt (4) Minority Interest (5) 10,000 10 1,00,000 5,000 25% (2500*10) 25,000 Preferred shares (1000*10) (6) Cash and Cash equivalents (7) Enterprise Value (3+4+5+6-7) 10,000 4,000 1,36,000
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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;
Number of shares traded on the Stock Exchange on a particular day: Market Price: Y X1*Y1+X2*Y2+X3*Y3 Volume weighted Average Market Price = X1+X2+X3..
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product of the number of equity shares bought and price of each such equity share divided by the total number of equity shares bought; A
A1+A2+A3..
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01.04.2011
Capital 100
100*61/365 16.71
01.06.2011
120 120*122/365 40.11
01.10.2011
90 90*182/365 44.88
As on Date
90 101.70
WAN
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TYPES OF OFFER
OPEN OFFER
VOLUNTARY OFFER
Initial Threshold
Creeping Acquisition
Change in Control
Indirect acquisition
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3(1)
Acquirer along with PAC 25% or more shares or voting rights
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3(2)
Acquirer with PAC holding 25% - 75% Creeping Acquisition - 5% in each F.Y.
CHANGE IN CONTROL
Through Shareholder Approval
SEBI (SAST) Regulations, 2011
INDIRECT ACQUISITION
Acquisition of Voting Rights or control over other entity that enable the Acquirer to exercise of such percentage of voting or control over Target Company
Acquirer
Control
B UK Ltd.
Target Company
72.93%
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Eligibility
No acquisition during the preceding 52 weeks without attracting the obligation to make a public announcement.
Condition
The aggregate shareholding not exceeds the maximum permissible non-public shareholding.
Restriction
No further acquisition of shares for a period of six months after completion of the open offer except by way of another voluntary open offer or competing offer.
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OFFER PRICE
Add Your Text
Offer Price
Specific Criteria for
Direct Acquisition
Indirect Acquisition
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OFFER PRICE
New Regulations
60 trading days Volume-weighted average market price
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Old Regulations
26-weeks and 2 weeks average
Simple Average
Compete Fees
Tex Text
To be included in Text
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ESCROW ACCOUNT
Opening of Escrow Account Not later than two working days prior to the date of DPS Amount of Escrow Deposit
Text On first Rs. 500 Crores
On balance Text amount Text 25% of the consideration
Text
Forms of Escrow Account Cash Bank Guarantee Freely transferable equity shares or securities
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INCREASE IN SHAREHOLDING BEYOND MAXIMUM PERMISSIBLE NON PUBLIC SHAREHOLDING AFTER THE OPEN OFFER
voluntary delisting offer for a period of 12 months from the completion of Offer Period
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Public Announcement
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2010
Mandatory
Constitution of Committee of Independent Directors (IDC). Recommendation on the Open offer, as to whether the offer , is or is not, fair and reasonable. Publication of the recommendations in newspapers at least two working days before the commencement of the tendering period.
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KEY POINT
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COMPETING OFFER
Open Offer by any other person TEXT TEXT TEXT (Competitor Acquirer) after an offer has
TEXT
already been given by an acquirer to TEXT TEXT TEXT the shareholders of the Target Company.
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TEXT
TEXT
Any condition in the agreement is not met for reasons outside the reasonable control of the acquirer
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Offer Period
x
TEXT
TEXT
TEXT
Exception: After 15 working days from DPS, and Deposit 100% consideration in the Escrow Account
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TEXT
TEXT
TEXT
Regulation 11(2)
Regulation 11(1) Exemption from the Open Offer obligations Relaxation from Procedural Requirements of Open Offer
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Reg. 3 (1)
TEXT Reg. 3 (2)
Open offer for crossing TEXT TEXT i.e. creeping TEXT acquisition limit, 5%
Change in Control
Reg. 4
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Reg 3 & 4
Inter-se-transfer Acquisition in the ordinary course of business
Reg 3
TEXT CDR Scheme
Reg 3 (1)
Buy Back under TEXT Regulation 3(1)
Reg 3(2)
TEXT
Right Issue
Buy Back
TEXT
TEXT
Acquisition in exchange TEXT of shares Acquisition from statelevel financial institutions Acquisition from a venture capital fund or a foreign venture capital investor
SARFAESI , Delisting
Transmission, succession or inheritance Section 87(2) of Companies Act, 1956 11/09/2012
TEXT
DISCLOSURES LIMITS
TEXT TEXT TEXT TEXT
TEXT
TEXT
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DISCLOSURES LIMITS
Event Based Disclosure
TEXT TEXT TEXT
Continual Disclosures
TEXT TEXT
Encumbered Shares
No obligation on the Target Company to give the disclosure to Stock Exchange.
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IMPACT
Beneficial for Private Equity Players and Investors.
TEXT More protection forTEXT the small shareholders. TEXT
Simplification in the provisions. More transparency and removalTEXT of ambiguity.TEXT TEXT TEXT At par with Global Practices prevalent for M&As.
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ISSUES UNADDRESSED
Negative Control Applicability of regulations on TEXT acquisition ofTEXT partly paid up TEXT shares Exemption from open offer on account of forfeiture of Shares
TEXT TEXT TEXT TEXT
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THANK YOU..
PAVAN KUMAR VIJAY
Our Services: Investment Banking I Valuation & Business Modelling I Mergers & Acquisitions I Tax & Transaction Advisory I ESOP/ESPS I Domestic & Cross Border Investment Structuring I Group Reorganisation I Corporate Funding I Issue Management
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