Download - Take Overs(Mu)
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TAKE-OVERS I
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MEANING, FORMS
A takeover involves the acquisition ofa certain block of equity capital of a
company which enables the acquirer
to exercise control over the affairs ofthe company
It means a change of controlling
interest in a company throughacquisition of shares by another group
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STEPS IN ACQUISITION
Acquiring company Acquirer
Acquired company Target
STEPS:
1.Deciding the inorganic growth
strategy implemented
2.Search and screen the possible
targets
3.Investigate and value the target
4.Evaluate the sources of finances
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FORMS OF TAKEOVER
Open market purchase/ Hostile the acquirer buys the shares of the
listed company in the stock market
Negotiated acquisition The acquirer buys shares of the target
co. from one or more existingshareholders in a negotiatedtransaction
Preferential allotment
The acquirer buys shares of target co
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FORMS.
Through preferential allotment ofequity shares
Bail-out
When a profit making company takesover financially sick co. to bail it out
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TAKEOVER CODE OF SEBI
I Listing Agreement
Regulatory Clauses 40A, 40B of
listing agreement
40A minimum level of publicshareholding (25%)
40B requirements of takeover to be
met
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TAKEOVER CODE
II Disclosure of shareholding andcontrol in Listed companies
Intimation to Target co.
An acquirer of shares holds in excessof 5%/10%/14%/54%/74%, is required
to disclose at every stage within 2 days
of allotment of shares Control
1.Right to appoint majority of the
directors
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TAKEOVER CODE.
2. To control the management
3.To policy exercisable by persons
acting individually in concert
Persons acting in concert
persons who cooperate for substantial
acquisition of shares / voting rights to
gain control over the target company
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TAKEOVER CODE
III Substantial acquisition of shares
Acquisition of 15% of shares / voting
rights of any company
Consolidation of holdings
1. Any acquirer holds from 15% - 55% -
any additional acquisition of 5% or
more must make a publicannouncement
2. More than 55% - 75% - any
additional shares acquisition public
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TAKE OVER CODE
3. If target company has listed shares(at least 10% of offer to the public) in
this case between 55% - 90% - any
additional shares purchase publicannouncement is a must
4. In case of Divestment
(Government holdings of 50% ormore) only one public
announcement is sufficient
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TAKEOVER CODE
IV Appointment of Merchant Banker
The acquirer has to appoint MB before
making public offer
V Public Announcement of offer
It should be made within 4 days of
entering into agreement with the target
co. In case of Indirect acquisition within
3 months of such acquisition
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TAKEOVER CODE
Offer letter sent to the shareholderswithin 21 days from submission toSEBI
Specified date the date for thepurpose of determining the names ofshareholders to whom the letter ofoffer would be sent
Offer price payable in a. cashb. issue/transfer of shares of acquirer
c. issue / transfer of secured
instruments
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TAKEOVER CODE
Public announcement of offer in 3newspapers Eng, Hindi, Regional
language
Copies SEBI, all SEs, targetcompany
VI Submission of Letter of offer to
SEBI a. the acquirer before public
announcement submit the draft letter
of offer to SEBI within 14 days of
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TAKEOVER CODE.
Offer period the period between thedate of entering into MOU / public
announcement and the date of
completion of offer formalities Obligations of the Acquirer
Send offer letter to all shareholders,
custodians of GDR/ADR, holders ofconvertibles within 45 days of public
announcement
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TAKEOVER CODE
Payment within 30 days of closure ofoffer to the accepted shareholders
If failed to pay, penal interest to be
paidIn case of withdrawal, the acquirer
should not any offer of acquisition ofshares in the target company:
1. For 6 months from the date ofannouncement of withdrawal and
2. 12 months from the date of closure of
offer
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TAKEOVER CODE
Obligations of the BOD of Targetcompany
With the approval of shareholders in
general meeting and publicannouncement the BODcannot :
I. Dispose assets
II. Issue capital
III. Enter into material contracts
IV. Appoint additional directors
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TAKEOVER CODE
Competitive bids
Within 21 days of public announcement
by any other acquirer other than the
acquirer who made publicannouncement
Provision of Escrow
The acquirer deposits cash in Escrowa/c
Deal value is Rs.100 crores 25%
deposit
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TAKEOVER CODE
Deposits consist of cash, bankguarantees, deposits of acceptable
securities
PENALTIES OF NON-COMPLIANCE Forfeiture of part or full sum in Escrow
a/c
Failure of intermediaries suspensionor cancellation of registration
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TAKEOVER CODE.
Misstatement of material informationBOD, merchant bankersliable
a. criminal prosecution
b. monetary penaltiesc. directions under the SEBI act
d. cease and desist order proceedings
e. adjudication proceedingsAny aggrieved party on the order of
SEBI may appeal to SecuritiesAppallate Tribunal