SEBI

Substantial Acquisition of Shares & Takeovers Regulations, 2011

SEBI, SAST 2011

Definitions: Acquirer Any person who directly or indirectly acquires or agrees to acquire whether by himself or through or with persons acting in concert with him, shares or voting rights in or control over a target company. Persons who with a common objective or purpose of acquisition of shares or voting rights in or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights in or exercise control over the target company.

Persons acting in concert (PAC)

SEBI, SAST 2011

Definitions: Control Includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreement or in any other manner.

The scope of term Control has been widen to include not only the right but also the situations where the persons have the ability to appoint majority of the directors or to exercise control in any other manner.

Substantial Acquisition of Shares, Voting Rights or Control

Substantial Acquisition of Shares, Voting Rights 3(1) Existing holding of Acquirer & PACs + fresh acquisitions should not exceed 25% of voting capital of target, unless they make an Open Offer.

INITIAL THRESHOLD Malaysia 33 Hong Kong 30 Australia 20 U.K. 30

Substantial Acquisition of Shares, Voting Rights or Control

Substantial Acquisition of Shares, Voting Rights 3(2) Acquirer & PACs with holding >25% but less than 75%, may acquire additional 5%* of voting capital in a financial year, without making an Open Offer. * allowed only till shareholding reaches the MPNP limit (i.e. 75%) - only Gross acquisitions to be considered

It will help the promoters in the consolidation of holdings; Flexibility to acquire 10% shares or voting rights within 2 days without triggering the open offer requirement.

Substantial Acquisition of Shares, Voting Rights or Control

Acquisition of Control 4 Irrespective of the acquisition or holding of shares, acquisition of control (direct or indirect) of target company cannot be made without the Public Announcement for an Open Offer
Includes the Right to: Appoint Majority of Directors Control the Management Control of Policy Decisions Exercisable Individually or with PAC Directly or Indirectly By virtue of: Shareholding Management Rights Shareholders Agreements Voting Agreement
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Substantial Acquisition of Shares, Voting Rights or Control

Indirect acquisition of shares or control 5 Acquisition of shares or voting rights or control over any company which would enable acquirer/PAC to exercise voting power or control over the target company, shall be considered indirect acquisition.

Substantial Acquisition of Shares, Voting Rights or Control

Voluntary Offer 6 Acquirer & PACs with holding >25% but less than 75%, may make a voluntary Public Announcement of an Open Offer provided their holding after the Open offer does not exceed the MPNP limit (i.e. 75%) - Acquirer not allowed to acquire during the offer period.

7(2) Minimum Offer size = 10% of target companys equity Maximum Offer size = Post-acquisition holding of acquirer +PAC not to exceed 75% of target companys equity.

Substantial Acquisition of Shares, Voting Rights or Control

Offer Size 7(1) Open Offer shall be for at least 26% of the total shares of the target company (as of the 10th day from closure of the tendering period) - Total shares to consider all potential increases in the no. of outstanding shares during the offer period contemplated as of the date of Public Announcement.

Substantial Acquisition of Shares, Voting Rights or Control

Offer Price 8(1) Minimum Offer price shall be the highest of the following:

(a) Highest Negotiated price (b) Volume-weighted average price paid by acquirer or PACs during last 52 weeks prior to the PA (c) Highest price paid during 26 weeks prior to the PA
(d) Volume-weighted average market price during the 60 trading days immediately preceding the PA

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Substantial Acquisition of Shares, Voting Rights or Control

Mode of Payment 9(1) Offer price may be paid in:

(a) Cash (b) Listed Equity shares of Acquirer or PACs (c) Listed secured debt of Acquirer or PACs (rating not below investment grade) (d) Convertible debt convertible into listed shares of Acquirer or PACs (e) Combination of the above

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Open Offer Process

Manager to the Offer 12(1) Prior to making the PA, acquirer shall appoint a Merchant Banker

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Open Offer Process

Timing of Offer 13(1) PA under regulation 3 & 4 to be made on the date of agreeing to acquire shares or voting rights in , or control over the target company. Publication of PA

14(1) PA to be sent to all stock exchanges on which shares of target (2) company are listed , SEBI and to the target company at its registered office. 14(3) Detailed PA to be published in all editions of: (a) any one English daily with wide circulation, (b) any one Hindi daily with wide circulation, (c) Any one regional language daily with wide circulation at the place of target companys registered office
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Open Offer Process

Contents of PA 15 Name & identity of Acquirer (and PACs) Name & identity of Seller Nature of proposed acquisition Consideration for the proposed Offer Price Offer Size

Conditions for minimum acceptance Filing of PA 16 Within 5 working days of the PA, acquirer shall through the Merchant Banker, file with SEBI a draft Letter of Offer (LOO)
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Open Offer Process

Provision of Escrow Account 17 Within 2 working days from PA, the acquirer shall create an Escrow account as a security for performance of his obligations:

Consideration Payable
Upto Rs 500 Crores On Balance

Escrow Amount
25% of Consideration Additional 10% on the balance consideration

Escrow Account may be funded by Cash, Bank guarantee in favour of Manager to the offer, Freely transferable securities

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Open Offer Process

Conditional Offer 19 Acquirer may make an Open Offer, conditional to minimum level of acceptance, provided: Where the conditional offer is made pursuant to an agreement, the agreement must have a condition that in the event the desired level of acceptance under the open offer is not received, the acquirer shall not acquire any shares under the open offer or the agreement.

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Open Offer Process

Competing Offer 20 Subsequent to a PA of an Open Offer, any other acquirer(s) can make a competing Open Offer within 15 days from the first PA.

Size of Competing Offer: A1 + SPA1+ OF1 = A2 + OF2

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Open Offer Process

Withdrawal of Offer 23 An Open Offer once made cannot be withdrawn, except in the following cases: (a) Statutory approval required for open offer (as disclosed in the PA) has been refused (b) Acquirer being a natural person, dies (c) Any condition in the SPA has not been met beyond the control of acquirer or such contract has been rescinded (provided such conditions have been disclosed in the PA) (d) Such circumstances in the opinion of the Board merit withdrawal.

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