Takeover panel finalises code

The panel suggested relaxation of the five per cent ceiling on creeping acquisition in cases where the acquisition was intended to provide an exit route to the investors who subscribed to their recent IPOs, he said. The committee has recommended that venture capital funds VCFs should be treated on par with state financial institutions while transfer of 15 per cent shares by the promoter of a venture fund, would not be liable for a public offer, that is in the event of a venture captitalist acquiring a stake of 15 per cent and above in a company it need not make a public offer.

However, Sebi chairman D R Mehta made it clear that this exemption needs to be more carefully examined by the Sebi board before it is put up for approval. For all other companies, in general, promoters holding above 75 per cent are exempted from making a 20 per cent public offer and, according to the committee, can make offers for less than 20 while they can acquire upto five per cent of the shares of the target company through the creeping route. For those holding between 50 per cent to 75 per cent the original regulation of making a public offer of not less than 20 per cent will remain and can again take advantage of the creeping acquisition route to acquire five per cent of the shares of the target company.

In both the cases the open offers should be unconditional. In fact the committee has proposed prohibiting conditional offers for 20 per cent holding while the method of payment should be uniformly applicable for all investors.

The committee said promoters holding more than 90 per cent stake in a company should be made to either acquire the remaining stake by making an open offer and delist or bring the holding to 90 per cent or less. This recommendation was meant to avoid a company claiming to be a public limited one and remaining listed, while in reality they were not so, Bhagwati said.

The Sebi is also undertaking a study on mergers, acquisitions and takeovers as disparate and separate activities in the marketplace. Mehta observed that the panel has opted for a case-to-case decision by Sebi transfer of shares which are part of cross-border mergers and acquisitions and whether at all to bring such deals under the takeover code or not. This had been decided on considering the problems involved in quot;enforceability and practicabilityquot; he said.

Since the takeover code was put in place in 1997 along with its amendment in 1998, 617 companies have undergone changes as a result of the application of the code, out of which 153 companies have undertaken restructuring through the open offer route. Value of restructuring through open offers was to the tune of Rs Rs 2,975.57 crore. Out of the above figure Rs 1973.60 crore was offered to shareholders and the remaining 1181 crore was proposed through memorandums of understanding.