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Takeover
A Monthly Publication by Corporate Professionals Year III Vol. VIII- August 2009
Panorama
Page 2 of 27
Content Page No.
Legal Update
-SAT order in the matter of Eight Capital Master Fund Limited and PACs
-SAT order in the matter of Meena Shah
-SAT order in the matter of Shingar Limited
-SAT order in the matter of Wealth Sea Pvt. Ltd. and Manali Properties &
Finance Pvt. Ltd.
-SAT order in the matter of Weizmann Ltd. and PACs
-Adjudicating Order in the matter of Vertex Securities Limited
-Adjudicating Order in the matter of Rishab Financial Services Limited
-Takeover Panel Exemption in the matter of Deccan Chronicle Holdings
Limited
-Consent Orders
- SEBI simplifies new creeping acquisition norms
3
Latest Open Offers 16
Hint of the Month 19
Regular Section
- An analysis of automatic exemption available in regulation 3(1)(f) of SEBI
Takeover Code
20
Case Study
- An Analysis of Takeover Offer of Disa India Limited 23
Market Update 26
Our Team 27
Insight
Page 3 of 27
SAT Order in the matter of Eight Capital Master Fund Limited and PACs
Facts:
On March 3, 2006 the Board of Directors of Pennar
Industries Limited (Target Company) passed a
resolution to convene an EGM for seeking the approval
of its shareholders for allotting convertible debentures
to Eight Capital Master Fund Ltd., Spinnakar Global
Opportunity Fund Ltd., Spinnakar Global Emerging
Markets Fund Ltd. and Spinnakar Global Strategic Fund
Ltd. (appellants) on preferential basis. Accordingly, on
March 27, 2006, the shareholders of the Target
Company approve the preferential allotment and on
July 21, 2006, the Debenture Committee of the BoD
allotted the debentures to the appellants.
The currency of debenture is 18 month from the date of their allotment. Consequently, on December
24, 2007, 2329851 debentures were converted into 15795600 equity shares constituting 14.6% of the
Expanded Capital of the Target Company and on January 26, 2008, remaining debentures were
converted into equity shares increasing the shareholding the appellant from 14.6% to 26%. As the
shareholding of the appellant has increased beyond 15%, therefore, on January 22, 2008 (4 days before
the conversion on January 26, 2008), the appellant made the public announcement in terms of
regulation 10 of the SEBI (SAST) Regulations, 1997 at a price of Rs.14.75 per share taking the date of
Board meeting i.e. March 03, 2006 as reference date. However, on examining the letter of offer, SEBI
directed the appellants to revise the offer price taking the date of public announcement as reference
date. This is against this order of SEBI, that the present appeal has been filed.
In case of conversion of
debentures, the date on which
BODs of the company allotted the
shares on conversion, should be
taken as the reference date for
determination of offer price.
Legal Update
Page 4 of 27
Issues:
Which date should be considered as the reference date for determination of offer price in terms of SEBI
(SAST) Regulations, 1997 where the public announcement has been made pursuant to the conversion of
convertible debentures into Equity Shares?
Decision:
It is held that for the purpose of determination of offer price, the date on which the BODs allotted the
equity shares on the conversion of debentures, should be considered as reference date and not the date
of BODs meeting on which they approve the allotment of debentures as no voting rights accrued on that
date.
Similar Judgment was passed in case of Sohel Malik v. Securities and Exchange Board of India.
SAT Order in the matter of Meena Shah
Facts:
Meena Shah (appellant) is the shareholder of DISA India Ltd.(Target Company). On December 17, 2008,
Hamlet Holding II APS and PACs (the acquirers) made an open offer to the shareholders of the Target
Company.
However, SEBI directed the acquirers to calculate the offer
price taking March 9, 2008 as the date of public
announcement of parent company. According to the
appellant, March 11, 2008 was the date on which the public
was made aware of the acquisition through the Bombay
Stock Exchange and that the offer price should be calculated
with reference to this date.
Issues:
Whether the appeal filed by the appellant is maintainable?
The appeal was dismissed where
a shareholder had filed an appeal
against direction given by SEBI
without making the acquirers as
a party to appeal.
Page 5 of 27
Decision:
The appeal was dismissed on the ground that besides making the SEBI as respondent, the acquirers
should also have been made the party to the appeal.
SAT Order in the matter of Shingar Limited
Facts:
Paramount Cosmetics India Ltd. (Target Company)
made the preferential allotment of 30 lacs shares
constituting 61.77% of the paid up capital of the Target
Company in favour of the appllant which has resulted
into triggering regulation 11(1) of the SEBI (SAST)
Regulations, 1997. Therefore, it is decided to initiate
the adjudication proceedings against the appellant in
terms of SEBI (Procedure for Holding Inquiry and
Imposing Penalties by Adjudicating Officer) Rules, 1995
and accordingly, a show cause notice was issued to the
appellant alleging the violation of regulation 11(1) of
the said regulations.
In response to the notice, the appellant submitted the detailed reply. However, without considering the
reply of the appellant, the adjudicating officer by his letter dated August 22, 2007 communicated to the
appellant his decision to hold an inquiry in the matter which is clearly a violation of sub-rule (3) of Rule 4
of the Rules. Against this order of adjudicating officer, the appellant has filed this appeal.
Issues:
Whether, in view of the above facts, the appeal filed by the appellant is maintainable?
Decision:
In view of the above facts, the appeal is allowed and the order passed by the adjudicating officer is set
aside.
SAT held that it is the duty of the
Adjudicating officer to issue a show
cause notice and to consider the
reply before initiating the
adjudication proceedings.
Page 6 of 27
SAT Order in the matter of Wealth Sea Pvt. Ltd. and Manali Properties & Finance Pvt. Ltd.
Facts:
On November 28, 2005, Wealth Sea Pvt. Ltd. and Manali
Properties & Finance Pvt. Ltd (appellant) acquired the
entire shareholding of Jumbo World Holdings Ltd. in DIL
RIM & Wheel Corporation Ltd (DIL) which in turn was
holding 74.5% shares in Dunlop India Ltd (Dunlop) and
68.98% shares and voting rights in Falcon Tyres Ltd.
With the acquisition in DIL, the appellants indirectly
acquire 74.5 % shares in Dunlop (Target Company)
which resulted into triggering the SEBI (SAST)
Regulations, 1997.
Therefore, in terms of SEBI (SAST) Regulations, 1997, the appellants made the public announcement at
an offer price of Rs.10 per share which was further increased to Rs.17.50 per share. However, the Board
is not satisfied with the offer price and therefore appointed M/s. Bansi S. Mehta &Co., to evaluate the
equity shares of the Target Company for the purpose of SEBI (SAST) Regulations, 1997. The Chartered
accountant in its report dated March 28, 2008 determined Rs.43.73 as the offer price and ordered the
appellants to revise their offer price. Against the order of SEBI, the present appeal is filed.
Contentions
1. Appellants contented that the valuation report of M/s. Bansi S. Mehta &Co., suffers from several
infirmities and it would not be safe to rely upon it.
2. Independent valuer appointed by the SEBI has not exercised due diligence required in determining
the value of the sick company.
3. They further requested to appoint an independent accounting firm to reassess the value of Target
Company which at the time of acquisition was a sick company.
The appellant are justified in
appointing the independent
chartered accountant where the
valuation report of the Chartered
accountant appointed by SEBI
suffers from several defects.
Page 7 of 27
Issues:
Whether the appellants are justified is requiring the SEBI to appoint an independent accounting firm to
reassess the value of the Target Company?
Decision:
Since the valuation report of M/s. Bansi S. Mehta &Co. suffers from several defect, therefore, the
appellants are justified in requiring the SEBI to appoint an independent Valuer for the purpose of
determination of offer price. In view of the above facts, M/s. Deloitte Touche Tohmatsu India Pvt. Ltd.
was appointed to value the equity shares of the Target Company and submit its report to SEBI within
one month of the receipt of the order.
SAT order in the matter of Weizmann Ltd. and PACs
Facts:
Weizmann Ltd. and PACs (appellants) holds 4,75,000
cumulative preference shares and 65.67% Equity Shares
of Weizmann Fincorp Limited (Target Company). In
accordance with Section 87 of Companies Act, 1956,
acquirer along with PAC had acquired voting rights on
these preference shares as the dividend on these shares
has remained unpaid for the last 2 years, thereby,
resulting into regulation 11 (1) of the SEBI (SAST)
Regulations, 1997 requiring the public announcement be
made to the shareholders of the Target Company.
However, the acquirer failed to make the required public
announcement and thus violated the provisions of
regulation 11(1) of SEBI (SAST) Regulations, 1997.
Therefore, a show cause notice was issued to appellant on 27.04.07, in response to which the appellant
submitted the detailed replies on 15.05.07 and 19.06.07. In the reply, the appellant contended that the
voting rights have been accrued on these preference shares on 31.12.2002, the date of the annual
SAT held that there is no requirement
of making the open offer where the
voting rights have been accrued on the
preference shares for nonpayment of
dividend after the amendment which
excluded the preference shares from
the purview of the SEBI Takeover
Code.
Page 8 of 27
general meeting, as it was on that date the dividend due on their preference shares remained unpaid for
an aggregate period of two years preceding the date of the meeting. However, as the preference shares
had been excluded from the purview of the SEBI (SAST) Regulations, 1997 with effect from 9.9.2002,
therefore, the appellants were not required to come out with a public announcement. On consideration
of the reply, Adjudicating officer held that the voting rights have been accrued on these preference
shares on July 1, 2002 as the company has last declared the dividend in its AGM held on January 31,
2001 for the financial year ended June 2000 and therefore, imposed the monetary penalty of
Rs.1,30,000 on the appellants. this is against this order of Adjudicating officer that the present appeal
has been filed.
Issues:
What is the date on which the voting rights accrue on the above cumulative preference shares and
whether there has been any violation of the SEBI (SAST) Regulations, 1997.
Decision:
It was inferred from Section 87 of Companies Act, 1956 that the right to vote does not get attached to
the preference shares nor they take the colour of equity shares unless their dividend remains due for
the period of 2 years. Thus, it was concluded that if no date is specified in the article then the voting
rights shall accrue from the date when dividend is deemed to be due i.e. on the EGM which held on
31.12.02 and not on the day immediately following the expiry of the year end i.e 01.07.02. Since, the
appellant acquired the voting rights on 31.12.02 i.e after the amendment dated Sep 09, 2002 came into
force, which excluded the preference shares from the ambit of SEBI (SAST) regulations, 1997, therefore,
the appellants were not required to make any public announcement. Hence the impugned order is set
aside and the appeal is allowed.
Page 9 of 27
Adjudicating Order in the matter of Vertex Securities Limited
Facts:
On examination of letter of offer filed by
Transwarranty Finance Limited (acquirer) for the
acquisition of shares of Vertex Securities Limited(
VSL), it was observed by SEBI, that Mr. Ranjan
Verghese, the promoter and Managing Director of
VSL, and Mr. Dilip Verghese, Mrs. Kunjumol Philip, Mr.
George Varkey Thalody, Mr. Thomas Alappat, Mrs.
Luciyamma Thalody, Mrs. Thressiyamma Nemri and
Mr. Ivan J Coelho (Noticees), have acquired additional
475000 shares(5.33%) on Oct 30, 1999 and 630250
shares (12.17%) on April 08, 2006 which has resulted
into triggering regulation 11 (1) and 11(2) of the SEBI
(SAST) Regulations,1997 requiring the open offer be
made to the shareholders of VSL.
However, the Noticees failed to make any public announcement and accordingly, adjudication
proceeding were initiated against them for the above violation of regulation 11(1) and 11(2) of SEBI
(SAST) Regulations, 1997. Prior to the above acquisition, the total holding of the promoter group was
69.99% of the paid up share capital of VSL.
Contention:
1. The Noticees contended that as regard the acquisition of 475000 shares is concerned, it is an
inter se transfer among the promoters which qualifies for exemption under regulation 3(1) (e)
(iv), but due to failure of compliance of necessary disclosures under Regulation 6, 7 and 8 of the
SEBI (SAST) Regulations, Noticees have become ineligible to avail benefit of said exemption.
2. No change is control.
Adjudicating officer imposed the
penalty of Rs.48,00,000 when there is
violation of regulation 11(1) and
regulation 11(2) and contention of the
Noticee that the Violation is
unintentional is rejected.
Page 10 of 27
3. Violation was done unintentionally and the investors have been adequately compensated by
making an open offer at price of Rs.31 per share.
Issues:
Whether there has been a violation of regulation 11 of SEBI (SAST) Regulations, 1997 by the Noticee and
whether the non compliance, if any, on the part of the Noticees attracts the monetary penalty.
Decision:
On the basis of above facts and circumstances of the case, Adjudicating officer impose the penalty of Rs.
48,00,000 on all the Noticees for their violation of provisions of Regulation 11 (1) and 11(2) of SEBI
(SAST) Regulations, 1997.
Adjudicating Order in the matter of Rishab Financial Services Limited
Facts:
On March 12, 2007, Mangal Kiran Securities Limited
(acquirer) made a public announcement for the acquisition of
shares of Rishab Financial Services Ltd. (Target
Company/Noticee) and thereafter filed the letter of offer. On
examination of the letter of offer, SEBI found that the
Noticee has delayed in making the disclosures under
regulation 6(2) & 6(4) of the SEBI (SAST) Regulations, 1997 for
the year 1997 and regulation 8(3) of the said regulations for
the year 2000 and has, thus, violated the provisions of SEBI
(SAST) Regulations, 1997.
Accordingly a show cause notice was issued to the Noticee, but, no response was received. Therefore,
many opportunities of personal hearing were granted to the acquirers. However, the Noticee did not
avail any of them. Therefore, adjudicating officer decided to proceed with the matter in accordance with
the information available on record.
Issues:
It has been decided that penalties
unless specifically made
retrospective must be applicable
from the date of amendment.
Page 11 of 27
What should be amount of penalty where the Noticee has violated the provisions of regulation 6 and 8
of SEBI (SAST) Regulations, 1997 and has not responded to the Noticees issued by Adjudicating Officer in
the said matter?
Decision:
As the violation has taken place before 29.10.2002 i.e. before the SEBI amendment increasing the
penalty from Rs. Five thousand to Rs. One lakh for each day during which such failure continues or
Rs.One crore whichever is less, therefore, penalty as applicable at that time should be imposed. It has
also been decided by Hon’ble Securities Appellate Tribunal in Rameshchandra Mansukahni vs SEBI
(Appeal No.151/2004) to the effect that penalties unless specifically made retrospective must inevitably
be only with effect from the date of amendment.
Thus, on the basis of above facts and circumstances of the case, Adjudicating officer impose the penalty
of Rs. 5,00,000 on the Noticee for the non compliance Regulations 6(2), 6(4) & 8(3) of the SEBI (SAST)
Regulations,1997 and for the continuing non-cooperative attitude of the Noticee towards the
proceedings.
Takeover Panel Exemption in the matter of Deccan Chronicle Holdings Limited
Facts:
Mr. T. Venkattram Reddy, Mr. T. Vinayak Ravi Reddy,
Mr. P.K Iyer and Mrs. T. Urmila Reddy (acquirers) are
the promoters of the Deccan Chronicle Holdings
Limited (Target Company) and hold 63% shares of the
target company. The target company has announced
its plan to buy-back its shares from its shareholders. As
the acquirer shall not tender any share held by it in the
target company in the proposed buy-back, in case of
100% response to the buy-back offer from other
shareholders of the target company, the voting rights
of the acquirer in the target company would increase
from 63% to 73.51% resulted into triggering the
Takeover Panel granted the exemption
where the increase in the promoter
shareholding is pursuant to the Buy
Back by the Target Company and there
is no active acquisition by the promoter
group.
Page 12 of 27
Regulation 11(2) of SEBI (SAST) Regulation, 1997 for
which the acquirer has filed the application seeking the
exemption on the following submission:
Grounds of Exemption:
1. No change in control;
2. There will be no active acquisition by the acquirers;
3. Increase in shareholding is incidental to buy back;
4. Minimum public shareholding will be maintained.
Decision:
On the basis of above facts, SEBI granted the exemption to the acquirers from the applicability of
regulation 11(2) of SEBI (SAST) Regulations, 1997.
Consent Order in the matter of Anand Lease and Finance Limited
M/s Anand Lease and Finance Limited (applicant) failed to make the requisite disclosures under
regulation 6(2), 6(4) and 8(3) of the SEBI (SAST) Regulations, 1997 and thus violated the provisions of the
said regulations. Therefore, vide letter dated March 10, 2009, the applicant has filed the consent
application seeking the settlement of the enforcement action that may be initiated by the SEBI and
proposed to pay Rs.3,00,000 towards the consent terms. The terms proposed by the applicant were
placed before the High Powered Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI
settle the above violations of the applicant.
Consent Order in the matter of Restile Ceramics Limited
While making the disclosure under regulation 8(3) of the SEBI (SAST) Regulations, 1997, Restile Ceramics
Limited (applicant) failed to include the shareholding of certain person acting in concert and thus,
violated the provisions of the said regulations. Therefore, vide letter dated October 04, 2007, the
Page 13 of 27
applicant has filed the consent application seeking the settlement of enforcement action that may be
initiated by SEBi and proposed to pay Rs.1,25,000 towards the consent terms. The terms as proposed by
the applicant were placed before the High Powered Advisory Committee and on the recommendation of
HPAC, SEBI settle the above violations of the applicant.
Consent Order in the matter of Joy Reality Limited
M/s Joy Reality Limited (applicant) failed to make the disclosures under Regulations 6(2), 6(4), 7(3) and
8(3) of the SEBI (SAST) Regulations, 1997 within the prescribed time and thus violated the provisions of
SEBI (SAST) Regulations, 1997. Therefore, vide letter dated March 25, 2009, the applicant has filed
consent application for the settlement of the above violations and proposed to pay Rs.3,25,000 as
settlement charges towards the consent terms. The terms as proposed by the applicant were placed
before the High Powered Advisory Committee (HPAC) and on the recommendation of the HPAC, SEBI
settled the above violations done by the applicant.
Consent Order in the matter of Purshottam Investofin Limited
Purshottam Investofin Limited (applicant) failed to make the disclosure under Regulation 8(3) of the SEBI
(SAST) Regulations, 1997 for the years 2004,2005,2006,2007 and 2008, and thus violated provisions of
the said regulations. Therefore, vide letter dated April 11, 2009, the applicant has filed consent
application for the settlement of the violations done under SEBI (SAST) Regulations, 1997 and proposed
to pay Rs.1,00,000 as settlement charges towards the consent terms. The terms as proposed by the
applicant were placed before the High Powered Advisory Committee (HPAC) and on the
recommendation of the HPAC, SEBI settled the above violations done by the applicant.
Consent Order in the matter of Winmore Leasing & Holdings Limited
Winmore Leasing & Holdings Limited (applicant) failed to make the disclosures under Regulation 6(2)
and 6(4) of the SEBI (SAST) Regulations, 1997 for the year 1997 and under Regulation 8(3) of the said
regulations for the years 1998 & 1999 and thus violated the provisions of SEBI (SAST) Regulations, 1997.
Therefore, vide letter dated March 30, 2009, the applicant has filed consent application for the
settlement of the above violations and proposed to pay Rs.1,00,000 as settlement charges towards the
consent terms. The terms as proposed by the applicant were placed before the High Powered Advisory
Page 14 of 27
Committee (HPAC) and on the recommendation of the HPAC, SEBI settled the above violations done by
the applicant.
Consent Order in the matter of BOC India Limited
On September 22, 1997, BOC Group Limited acquired 1,29,91,132 Equity Shares pursuant to the right
issue by BOC India Limited (Target Company) which were transferred to BOC Holdings (applicant)
consequent to the trust deed dated September 30, 1997 executed in favor of BOC Holdings by BOC
Group Limited. The above acquisition of shares is eligible for exemption in terms of regulation 3 of SEBI
(SAST) Regulations, 1997 provided that the conditions specified under the said regulations are complied
with. However, the applicant filed the report under regulation 3(4) read with regulation 3(5) with
considerable delay. Therefore, vide letter dated June 03, 2008, the applicant has filed this consent
application seeking the settlement of enforcement action that may be initiated by the SEBI for the
aforesaid failure and proposed to pay Rs.2,00,000 towards the consent terms. The terms as proposed by
the applicant were placed before the High Powered Advisory Committee (HPAC) and on the
recommendation of HPAC, SEBI settle the above violations of the applicant
Consent Order in the matter of Madan Financial Services Limited
Shri Madan Chand Darda (applicant) made the disclosure under Regulation 6(3) of the SEBI (SAST)
Regulations, 1997 for the year 1997 and under Regulation 8(2) of the said regulations for the year 2000
with considerable delay. Therefore, vide letter dated November 05, 2009, the applicant has filed
consent application for the settlement of the violations done under SEBI (SAST) Regulations, 1997 and
proposed to pay Rs.50,000 as settlement charges and Rs.25,000 as administrative charges towards the
consent terms. The terms as proposed by the applicant were placed before the High Powered Advisory
Committee (HPAC) and on the recommendation of the HPAC, SEBI settled the above violations done by
the applicant
Consent Order in the matter of Ahluwalia Contracts (India) Limited
Adjudication proceedings were initiated against M/s. Tidal Securities Private Limited, Mr. Bikramjit
Ahluwalia and Mr. Vikas Ahluwalia (‘Noticees’) for the violation of regulation 11(2) of the SEBI Takeover
Code in the matter of acquisition of shares of Ahluwalia Contracts (India) Ltd. Pending the adjudication
proceeding, the Noticees have filed the consent application dated November 24, 2008 for the
Page 15 of 27
settlement of the above violations and proposed to pay Rs.5,00,000 as settlement charges and
Rs.25,000 as administrative charges towards consent terms. The terms as proposed by Noticees were
placed before the High Powered Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI
disposes of said proceedings against the Noticees.
SEBI simplifies new creeping acquisition norms
On 30th October 2008, SEBI came out with an amendment in SEBI (SAST) Regulations whereby an extra
creeping acquisition limit of 5% was allowed to the shareholders holding 55%-75% shares. However, it
was not clarified that whether such 5% acquisition limit is available in one financial year, as allowed
under regulation 11 (1) for shareholders holding 15%-55% shares. Therefore, on August 06, 2009, SEBI
came out with a clarification circular amplifying the provision of regulation 11(2) as contained in the
amendment dated October 30, 2008.
Analysis of the circular
1. The creeping acquisition is allowed only to the acquirer who together with the PACs with him
holds 55% or more shares in the Target Company:
2. The creeping acquisition as allowed under second proviso to sub-regulation (2) of regulation 11
is not at par with the creeping acquisition allowed under regulation 11(1) of the SEBI (SAST)
Regulations, 1997.
3. The creeping acquisition limit of 5% as prescribed under the said proviso is allowed once during
the entire life time of the Target Company and can be made in one or more trenches without
any restriction on the time frame;
4. The limit of 5% shall be calculated by aggregating all the purchases without netting the sales;
5. Irrespective of the level of minimum public shareholding to be maintained in terms of clause
40A of the listing agreement, the total shareholding of the acquirer along with the
PACs consequent to the creeping acquisition as allowed under second proviso to sub-regulation
(2) of regulation 11 should not increased beyond 75%.
Page 16 of 27
Name of the
Target Company
Name of the
Acquirer and PAC
Details of the
offer
Reason of the offer Concerned Parties
Indo Zinc Limited
Regd. Office
Mumbai
Paid up capital
Rs 4.5 crore
Listed At
BSE, DSE, ASE and
MPSE
ICL Financial
Services along
with The India
Cements Limited
(PAC)
Offer to acquire
9,00,000 (20%)
Equity Shares at a
price of Rs.22.50
per share payable
in cash.
Regulations
10 and 12
SPA to acquire
17,87,700 (39.73%)
Equity Shares of Rs.
10/- each at a price
of Rs.22.50 per share
payable in cash.
Merchant Banker
MAPE Advisory
Group Private
Limited
Registrar to the
Offer
Integrated
Enterprises (India)
Ltd
Kolmak Chemicals
Limited
Regd. Office
Kolkata
Paid up capital
Rs. 1.99 Crore
Listed At
CSE
S. Sukumar & S.
Kalaiyarasi
Offer to acquire
3,99,985 Equity
Shares
representing 20%
of the paid up
capital at a price
of Rs.15/- per
share payable in
cash.
Regulations
10 and 12
SPA to acquire
8,90,105 (44.51%)
Equity Shares
at a price of Rs. 15/-
per share and off
market acquisition of
3,09,895 (15.49%)
Equity Shares at a
price of Rs.15
aggregating the
Merchant Banker
VC Corporate
Advisors Private
Limited (Formerly
Eccentric Capital
Private Limited)
Registrar to the
Offer
Maheshwari
Datamatics Private
Latest Open Offers
Page 17 of 27
shareholding of the
acquirer to 12,00,000
(60%) Equity shares.
Limited
IAG Company
Limited
Regd. Office
Kolkata
Paid up capital
Rs. 6.43 Crores
Listed At
BSE and CSE
Anjaniputra Ispat
Limited
Offer to acquire
26,87,880 Equity
Shares
representing 20%
of the Expanded
Capital at a price
of Rs.12/- each
plus interest of Rs.
0.75/- per share
payable in cash.
Regulations
10 , 11 and 12
Acquisition of
26,89,592 (41.77%)
Equity Shares at a
price of Rs.11.33 and
Preferential
allotment of
70,00,000 Equity
Shares representing
72.10% of the
expanded capital at a
price of Rs. 12/- per
share.
Merchant Banker
MICROSEC Capital
Limited
Registrar to the
Offer
CB MGMT Services
(P) Limited
Anukaran
Commercial
Enterprises
Limited
Regd. Office
Mumbai
Paid up capital
Rs. 96 Lacs
Listed At
BSE
Premal S Parekh,
Neha P Parekh,
Paras K Mehta,
Parag K Mehta,
Hansa P Shah,
Kushal P Shah,
Alpesh K Dedhia,
Krishna C Birmole
and Anuradha K
Birmole along with
the PACs
Offer to acquire
1,92,000 (20%)
Equity Shares at a
price of Rs.20/-
per share payable
in cash.
Regulations
10 and 12
SPA to acquire
2,91,010 (30.31%)
Equity Shares
at a price of Rs. 10/-
per share increasing
the shareholding of
the acquirers along
with PACs from
14.46% to 44.77%.
Merchant Banker
SMC Capitals
Limited
Registrar to the
Offer
Purva Sharegistry
Pvt. Limited
Page 18 of 27
Vybra Automet
Limited
Regd. Office
Andhra Pradesh
Paid up capital
Rs.7.12 Crores
Listed At
BSE
Mandakini
Holdings Private
Limited
Offer to acquire
up to 14,25,800
(20%)
at a price of
Rs.10/- per share
payable in cash.
Regulations
10 and 12
SPA to acquire
17,37,375 (24.37%)
Equity Shares
at a price of Rs. 10/-
per share payable in
cash.
Merchant Banker
VC Corporate
Advisors Private
Limited
Registrar to the
Offer
Niche
Technologies
Private Limited
Man Aluminium
Limited
Regd. Office
Mumbai
Paid up capital
Rs.3.38 crore
Listed At
NSE and BSE
Ravinder Nath
Jain, Mohinder
Jain and PACs
Offer to acquire
676,061 (20%)
Equity Shares at a
price of Rs.45 each
payable in cash.
Regulations
10 and 12
SPA to acquire
1,559,888 (46.15%)
Equity Shares at a
price of Rs.45 per
share payable in
cash.
Merchant Banker
SPA Merchant
Bankers Limited
Registrar to the
Offer
Beetal Financial &
Computer Services
Private Limited
Essen
Supplements India
Limited
Ganesh Kumar
Singhania and
Anita Singhania
Offer to acquire
12,00,000 Equity
Shares
representing
Regulations
10 and 12
Preferential
Merchant Banker
VC Corporate
Advisors Private
Limited
Page 19 of 27
Regd. Office
Andhra Pradesh
Paid up capital
Rs.5.78 crore
Listed At
BSE, ASE and HSE
20.66% of the
expanded voting
Equity Share
capital and 20.88%
of expanded
voting share
capital at a price
of Rs.10 payable in
cash.
allotment of 20, 00,
000 Equity Shares
and SPA to acquire
10,54,588 Equity
Shares increasing the
shareholding of the
acquirers from Nil to
30,54,588 Equity
Shares representing
52.58% of expanded
subscribed Equity
Share capital and
53.14% of expanded
voting share capital.
Registrar to the
Offer
Maheshwari
Datamatics Private
Limited
Hint of the Month
The minimum offer price in case of disinvestment of a Public Sector Undertaking, whose
shares are infrequently traded, shall be the price paid by the successful bidder to the Central
Government or the State Government, arrived at after the process of competitive bidding of
the Central Government or the State Government for the purpose of disinvestment and other
criteria’s as mention in regulation 20(5) of the SEBI (SAST) Regulations, 1997 will not be
considered.
Page 20 of 27
An analysis of automatic exemption available in regulation 3(1)(f) of SEBI Takeover Code
Regulation 3 of the SEBI Takeover Code deals with the provisions relating to the automatic exemption to
the acquirer from complying with provision of regulation 10, 11 and 12 of the SEBI Takeover Code
requiring the open offer be made to the shareholders of the Target Company when the acquirer has
crossed the limit prescribed under the said regulations. However, the exemption as provided under
regulation 3 is subject to the compliance with the conditions as prescribed under the said regulation. It
is noteworthy to mention here is that regulation3 provides the exemption only from the requirement of
making the open offer as required under regulation 10, 11 and 12 and not the from the requirement of
making the disclosure as requisite under regulation 6, 7 and 8. An analysis of the provision contained in
regulation 3(1)(f) is detailed below:
Nothing contained in Regulations 10, Regulation11 and Regulation 12 of these regulations shall apply
to acquisition of shares in the ordinary course of business by,-
i. a registered stock-broker of a stock exchange on behalf of clients;
Shares acquired by a registered stock broker on behalf of its clients in the ordinary course of
business are excluded while calculating the individual shareholding of the stock broker as the
beneficial ownership in those shares is with the client and he has no ownership interest in those
shares.
This has also been decided in a proceeding against Angel Broking Limited. In this case,
Adjudicating officer held that where the Broker acquires the shares on behalf of the client, then
he will not be treated as the acquirer in respect of those shares and as such, those shares will
not be included in his own shareholding for the purpose of calculating the limit as prescribed
under regulation 10, 11 and 12 of SEBI Takeover Code.
ii. a registered market maker of a stock exchange in respect of shares for which he is the market
maker, during the course of market making;
Regular Section
Page 21 of 27
Similarly, the acquisition of shares by the registered market makers in the ordinary course of
their business in excess of the limit as prescribed under regulation 10, 11 and 12 of the SEBI
Takeover Code are also exempted from the applicability of the said regulation.
iii. by Public Financial Institutions on their own account;
Public financial institutions on their own account can also acquire shares in the ordinary course
of business without triggering the SEBI Takeover Code.
iv. by banks and public financial institutions as pledgees;
Shares acquired by the banks and financial institutions as pledgees in consideration of the loan
advanced are excluded from the purview of the SEBI Takeover Code. A detailed analysis of the
above provision is given below:
When the shares are pledged:
As regards the applicability of regulation 10 and 11 of SEBI (SAST) Regulations, 1997 is
concerned, it is noteworthy to mention here is that when the shares are pledged with the banks
as security for availing the loan in excess of the limit specified under the said regulations, then
the banks are not required to comply with regulation 10 and 11 of the SEBI (SAST) Regulations,
1997 as the beneficial interest in the shares remain with the pledgor even after the pledge and
the banks have not acquired any ownership in the shares. Further regulation3(1)(f)(iv) of the
SEBI (SAST) Regulations, 1997 exempt the acquisition of shares by the banks and public financial
institution as pledgees in the ordinary course of their business from the applicability of
regulation 10, 11 and 12.
On the invocation of pledge by the pledgee:
When pledge have been invoked by the bank and the shares were transferred to them, then,
the beneficial rights in those pledged shares was also transferred to them and pledgors have no
right in those shares. On the invocation of pledge, it will be treated as sale of shares by the
pledgors and they are required to make the disclosures, if any, applicable on them in terms of
SEBI (SAST) Regulations, 1997 and SEBI (PIT) Regulations, 1992.
Page 22 of 27
The similar facts have also been decided by the adjudicating officer in K Koteswara Rao . In this
case, Adjudicating officer held that when the pledge have been invoked and the pledged shares
are transferred, then it will be treated as the sale of shares by the pledgors.
As regards the compliance by the banks is concerned, it is noteworthy to mention here is that
regulation 3(1)(f)(iv) of the SEBI (SAST) Regulations, 1997 exempt the acquisition of shares by
the banks and public financial institution as pledgees in the ordinary course of their business
from the applicability of regulation 10, 11 and 12.
However, the said regulation has mention the acquisition of shares as pledgees, thus, it is not
clear whether the exemption is with respect to event when the shares have been pledged or
even for the acquisition of shares by the banks when the pledge have been invoked.
Since the invocation of pledge and acquisition of shares consequent to the invocation, is a part
of their ordinary business, therefore, it seems that it would also be exempted from the
applicability of regulation 10, 11 and 12 of the said regulations.
On the acquisition of shares from the pledgee after the pledge has been invoked and the
shares have been transferred to the pledgee:
When the shares transferred consequent to the invocation of pledge to the pledgee are to
repurchased, then, it will be considered as the fresh acquisition and SEBI (SAST) Regulations,
1997 will be applicable on the transferee in the same way as it would have been, had the said
shares have been acquired otherwise.
This interpretation has been taken from the judgment given by the Adjudicating Officer in K
Koteswara Rao wherein it was held that when the shares have been transferred to the pledgee
consequent to the invocation of pledge, then, it will be treated as the sale of shares by the
pledgors. Therefore, the said transfer is considered as the sale, accordingly the acquisition of
those sold shares by the pledgors will be considered as the fresh acquisition and will require the
compliance of SEBI(SAST) Regulations, 997 if any applicable on them.
v. the International Finance Corporation, Asian Development Bank, International Bank for
Reconstruction and Development, Commonwealth Development Corporation and such other
international financial institutions;
Page 23 of 27
vi. a merchant banker or a promoter of the target company pursuant to a scheme of safety net
under the provisions of the Securities and Exchange Board of India (Disclosure and Investor
Protection) Guidelines, 2000 in excess of limit specified in sub-regulation (1) of Regulation 11.
Thus, it is clear that the shares acquired in the ordinary course of business by the intermediaries
are exempted from the category of making public offer.
AN ANALYSIS OF TAKEOVER OFFER OF DISA INDIA LIMITED
ABOUT DISA INDIA LIMITED (“TARGET COMPANY”)
DISA offers a complete range of ferrous and aluminum castings
production solutions for the international foundry industry together
with metal surface finishing solutions. DISA serves international
industrial manufacturers, foundries and metalworking industries
with leading edge technology solutions, tailored to their specific
needs
DISA II A/S is the holding of DISA group of Companies worldwide with subsidiaries in China, Switzerland,
Japan, Denmark, Germany, United Kingdom, India and in various other countries.
HAMLET HOLDING II APS (“ACQUIRER”)
Hamlet Holding II APS is an Unlisted Limited Liability Company, incorporated in Denmark. The ultimate
controlling ownership of Hamlet Holding II APS is with the Emerging Europe Convergence Fund II LP, a
limited liability partnership which is managed by Mid Europe Partners and their affiliates.
ANALYSIS OF INDIRECT ACQUISITION OF DISA INDIA LIMITED
As on the date of public announcement for the Target Company i.e. December 17, 2008, the acquirer
holds 100% shares of DISA II A/S which has been acquired from Procuritas Group vide Share Sale and
Case Study
Page 24 of 27
Purchase Agreement dated March 09, 2008. However, it does not hold directly any shares in the Target
Company. DISA II A/S holds 100% shares of DISA A/S which in turn holds 100% shares of DISA AG. DISA
A/S owns 3,02,749 Equity Shares and DISA AG holds 8,18,902 Equity Shares in the Target Company
constituting 20.05% and 54.22% of the paid up capital of the Target Company.
Thus, pursuant to the acquisition in DISA II A/S, the acquirer has indirectly acquired 74.27% stake in the
Target Company which has resulted into triggering SEBI (SAST) Regulations, 1997 requiring the open offer
be made to the shareholders of the Target Company.
OPEN OFFER TO THE SHAREHOLDERS OF THE TARGET COMPANY
Consequent to the above acquisition, on December 17, 2008, the acquirer has made the open offer to
acquire 3,02,041 Shares representing 20% of the paid-up and voting equity share capital of the Target
Company, at a price of Rs. 1,657/- per Share payable in cash. Further, in accordance with regulation 18 of
the SEBI (SAST) Regulations, 1997, on December 31, 2008, the acquirer submitted the detailed letter of
offer with the SEBI on which the SEBI issued its observation vide its letter dated February 06, 2009 which
is stated as follows:
“The offer price may be calculated in terms of regulation 20(4) read with 20(12) and the date of PA for
the parent company may be treated as the date of Share Sale and Purchase Agreement i.e. March 09,
2008. Accordingly the consequent changes may be made in the revised offer document.”
APPEAL TO SAT
However, the acquirer being aggrieved by the order of SEBI, has preferred an appeal before Securities
Appellate Tribunal (SAT). The tribunal has directed the acquirer and PACs that during the time when the
Acquirer DISA II A/S
100%
DISA A/S DISA AG
100% 100%
Target Company
20.05% 54.22%
Indirect acquisition of 74.27% (20.05% plus 54.22%)
Page 25 of 27
appeal is pending before it, they shall not come out with the open offer in pursuance of the public
announcement already made and will pay the interest to the shareholders for the period during which
the appeal remains pending before the tribunal in case where they fail in appeal.
APPEAL BY A SHAREHOLDER AGAINST THE SEBI ORDER
Further, Meena Shah (appellant), one of the shareholders of Target Company has also filed an appeal
before the SAT against the above order of SEBI requiring the appellant to re calculate the offer price
taking March 09, 2008 as date of PA of the parent company. According to the appellant, March 11, 2008
was the date on which the public was made aware of the acquisition through the Bombay Stock Exchange
and therefore, the offer price should be calculated with reference to this date. However, the said appeal
was dismissed by the SAT.
DECISION OF THE APPELLATE TRIBUNAL
Regulation 20(12) of the SEBI (SAST) Regulations, 1997 provides that the offer price for indirect acquisition
or control shall be determined with reference to the date of the public announcement for the parent
company and the date of the public announcement for acquisition of shares of the target company,
whichever is higher, in accordance with sub-regulation (4) or sub-regulation (5) of regulation 20 of the
SEBI (SAST) Regulations, 1997.
A public announcement is an announcement is an announcement made in the newspaper by the acquirer
primarily disclosing his intention to acquire further shares of the Target Company from the existing
shareholder by means of an open offer and the offer is said to have been made only on the date when
the public announcement appears in the newspaper.
Thus, regulation 20(12) pre-supposes that when the parent company get acquired, the takeover code get
triggered and a public announcement is made. However, in the instant case no public announcement was
made for the acquisition of parent company as the acquisition was made outside India.
Since no public announcement was made when the parent company was acquired by the acquirer,
therefore, the date on which share and stock Purchase Agreement was executed i.e. March 09, 2008,
cannot be taken as the public announcement of the Parent Company and the order of the Board was set
aside.
Page 26 of 27
Reliance Infra acquires majority stake in Reliance Cementation
Reliance Infrastructure, India’s largest infrastructure company on ownership of assets basis, has
acquired a 51% stake of Reliance Cementation from it’s another Group firm Reliance Natural
Resources. As a result of the above acquisition, Reliance Cementation has become the 100%
subsidiary of Reliance Infrastructure.
NOBLE GROUP Sells 51% stake in Noble Grain India To GP Group
Asia’s largest diversified commodities trading company Noble Group has exited from Indian
edible oil market by selling its majority stake in Noble Grain India to GP Group of Thailand – a
150 year old group having interest in shipping, trading and hospitality. With this, GP Group along
with its partner Mansingka family now owns 100% of Noble Grain India to be renamed as
Geepee Agri Pvt. Ltd.
TTSL proposes to buy stake in Matrix
TATA Teleservices (TTSL) is in talks to buy majority Stake in Matrix Cellular Services by picking up
around 15% stake in Matrix in the first year and gradually increase the stake to about 75% by
the end of third year. The Mobile store (TMS), the telecom retail chain of Essar group is also in
the tussle for Matrix. The deal with Matrix will help TTSL to offer extremely low call rates to its
subscribers travelling abroad
SC approval for Zenotech Open Offer
Supreme Court of India has given its approval to Daiichi to go ahead with its open offer to the
shareholders of Zenotech at a price of Rs. 113.62 per share. Earlier Daiichi has been restrained by
the Madras High Court on a complaint filed by the Minority shareholders on the ground that
Price of Rs.113.62 Per share is not justified and It should pay a price of Rs.160 per share being the
price paid by the Ranbaxy in January 2008 for the acquisition of stake in Zenotech.
Market Update
Page 27 of 27
Ruchi Hans
Associate [email protected]
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Swati Jain
Analyst [email protected]
Disclaimer:
This paper is a copyright of Corporate Professionals (India) Pvt. Ltd. The entire contents of this
paper have been developed on the basis of latest prevailing SEBI (Substantial Acquisition of Shares
and Takeover) Regulations, 1997 in India. The author and the company expressly disclaim all and
any liability to any person who has read this paper, or otherwise, in respect of anything, and of
consequences of anything done, or omitted to be done by any such person in reliance upon the
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