take overs(mu)

7/30/2019 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

take overs(mu)

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