An open offer takes place when the company wishes to raise capital efficiently. As a secondary market offering, the open offer allows stakeholders of a company to buy shares/stocks at a lower price when compared to the stock's prevailing market price.
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 deals with open offer procedure. The term ‘Takeover’ has not been defined under the said Regulations, the term basically envisages the concept of an acquirer taking over the control or management of the target company. When an acquirer acquires substantial quantity of shares or voting rights of the target company, it results in the Substantial acquisition of Shares.The events which triggers for making an open offer are:
- Any acquisition of shares or voting rights in the target company by the acquirer and PAC which entitle them to exercise in aggregate 25% or more voting rights.
- Any acquisition of shares or voting rights exceeding permissible creeping limit (5%) in a financial year. This situation arises in cases where the acquirer and PAC have acquired and holds shares or voting rights in the target company which entitles them to exercise 25% or more but less than maximum permissible non-public shareholding and further acquires more than 5% shares or voting rights in a financial year.
- Acquisition of shares by any person such that the individual shareholding of such person acquiring shares exceeds stipulated thresholds irrespective of whether there is a change in the aggregate shareholding with the PAC.
- An indirect acquisition of shares or voting rights requiring an open offer would be considered as direct acquisition, for pricing, timing of open offer and other compliances/requirements of open offer, where the proportionate net assets or sales turnover or market capitalization of the target company as a percentage of the consolidated net asset or sales turnover or the enterprise value for the entity or business being acquired is in excess of 80% on the basis of the most recent audited annual financial statements (Deemed Direct Acquisition).
- Any revision in voluntary offer size made by the acquirer within 15 working days from the PA of the competing offer.
Minimum open offer size in case of direct and indirect acquisition of shares or voting rights or control over the target company is 26% of the total shares of the target company.
- The open offer process includes:
- Filing of Public Announcement,
- Filing and Publication of Detailed Public Statement
- Opening and deposit in Escrow account
- Filing and submission of Draft Letter of Offer with SEBI for issuing observation
- Sending of Letter of Offer to Shareholders
- Filing and Publication of Offer Opening Public Statement
- Filing and Publication of Recommendation of Independent Directors of Target Company
- Tendering of Shares through Stock exchange mechanism
- Payment to tendering public shareholders from Escrow Account
- Filing and Publication of Offer Closing Public Statement
- Filing of Post Offer Open Report with SEBI
No comments:
Post a Comment