Acquirers told to reveal stake at three trigger points

Mumbai, Nov 13: The lobbying by chambers of commerce and promoters against hostile takeovers and share purchases seem to be paying off. In...

Mumbai, Nov 13: The lobbying by chambers of commerce and promoters against hostile takeovers and share purchases seem to be paying off. In the first major change in the takeover code following the Bajoria raid on Bombay Dyeing, the Securities and Exchange Board of India Sebi-constituted PN Bhagwati panel on takeovers has decided that acquirers will have to report their acquisition of shares in a company to both the target company and the stock exchanges when they cross three trigger points 8212; 5 per cent, 10 per cent and 14 per cent.

Currently, acquirers were only required to inform the company and that too in case of crossing only one level 8212; 5 per cent of the company8217;s share capital. The whole issue has been in sharp focus, since Bombay Dyeing made its claim that Bajoria did not inform the company when he crossed the 5 per cent mark. Bajoria has, however, claimed he informed the company.

8220;We have decided that acquirers have to inform both the target company and the stock exchanges where it is mostly traded, along with the National Stock Exchange NSE, at three trigger points when they cross five, 10 and 14 per cent levels,8221; committee chairman Justice P N Bhagwati told reporters after the meeting here on Monday. The stock exchanges, in turn, will have to post the information on their websites immediately, he said and added: quot;The decision is intended to avoid any confusion in such cases.quot;

On the issue of minimum offer by the acquirer three different views emerged at Monday8217;s meeting 8212; to fix it at 36 per cent, 51 per cent, 100 per cent or keeping the status quo, Justice Bhagwati said. However, no clear decision had emerged at the meeting, so the issue would be taken up on the second day of the meeting on Tuesday.

The Sebi panel is meeting against the backdrop of two crucial cases 8212; the Bajoria-Wadia battle in Bombay Dyeing and the AH Dalmia hostile bid for control of GESCO Corporation. The panel will also meet representatives of financial institutions on Tuesday afternoon to seek their views on whether FIs need to be brought within the purview of the takeover code since they are increasingly turning activist and even seeking to control companies.

Among other crucial issues which are expected to be discussed on Tuesday is creeping acquisition limit of 5 per cent and relaxations thereto and whether a lock-in period can be applied for acquisitions by promoters above this limit to avoid promoters playing in the stocks of their own companies.

There was a strong demand from Indian companies to have a re-look at the 5 per cent creeping acquisitions limit to prevent them from being raided by predators. One option is to keep the existing 5 per cent limit as it is, and, if promoters cross it, they may be asked to adhere to a lock-in for those shares for a certain period of time, say one, two or three years. This will prevent promoters from merely turning into traders in their own companies8217; shares.

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Sources said if there was no lock-in, then promoters could buy shares in the name of consolidation of their holdings and then sell them. quot;If they want to consolidate their holding, why should they be selling? A lock-in could ensure that they stay in the company,quot; said an analyst.

While this would be discussed in detail at the panel meeting, doing away with the 5 per cent limit subject to a lock-in may also be deliberated upon.The basic idea is to ensure that promoters do not end up playing the market in their companies8217; shares under the garb of consolidation.