Post on 09-Apr-2018
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The Takeover Code
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SEBI Takeover Code
n AcquirerAcquirer
n Persons Acting in ConcertPersons Acting in Concert
n ControlControl
n Offer periodOffer period
n Public shareholdingPublic shareholding
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Key Definitions
Acquirer means
Person who, directly or indirectly, acquires or agrees to acquire shares or voting rights
in the target company; or
Acquires or agrees to acquire control over the target company ;
Either by himself or with any other person acting in concert with the acquirer
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Key Definitions
Person acting in concert comprises,
for a common objective or purpose of substantial acquisition of shares or voting rights
or gaining control over the target company,
pursuant to an agreement or understanding (formal or informal),
directly or indirectly co-operate by acquiring or agreeing to acquire shares or votingrights in the target company or control over the target company
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Key Definitions
Control shall include
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 agreements
or in any other manner;
Change in control arising on account of inter-se promoter transfer shall not be
considered as change in control provided the same is carried out as per regulation
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Key Definitions
Promoter means -
any person who is in control of the target company,
any person named as promoter in any offer document of the target company or
any shareholding pattern filed by the target company with the stock exchange
pursuant to Listing Agreement, whichever is later; or;
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12/14/10
Trigger Points
n
n Disclosure - More than 5% or10% or 14% shares orvoting rights
n
15% shares or voting rightsn 15% -55% - Creeping
Acquisition limit
n Any acquisition beyond 55%
n Delisting offer
n Change of control
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n Non Applicability
Allotment in an IPO
Allotment in a rights issue
Allotment to underwriters
Inter-se transfer amongst group/ relatives /
Promoters / Indian Promoters and Foreigncollaborators
Acquisition by broker in the ordinary course of business
Acquisition by International FIs
Acquisition of shares by way of transmission / successionor inheritance
No strings attached
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No strings attached
Acquisition of shares by Government companies / statutorycorporations [disinvestments specifically excluded fromthe exemption]
Transfer of shares from state level financial institutions to co-promoters
Transfer from venture capital funds to promoters of venturecapital undertakings
Pursuant to a scheme under SICA / Scheme of arrangement /reconstruction including amalgamation / demerger /merger under any law, Indian or foreign
Acquisition of unlisted shares
Other cases as may be exempted by the SEBI Board
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n Minimum 20% of the voting capital of the Company
n If public offer results in public shareholding being reduced to 25% or less,the acquirer shall either
Make an Offer for all the outstanding shares incompliance with Delisting Guidelines of SEBI
Undertake to disinvest through an offer for sale / publicissue within 6 months such number of shares so as tocomply with the listing requirements
n If offer is well received, acceptance to be on a proportionate basis inconsultation with the Merchant Banker.
n Minimum marketable lot or entire holding of the shareholder
n
The Quantum
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The Offer Price
n
n The offer price shall be the highest of
The negotiated price
Price paid by the acquirer or PAC during the 26 week periodprior to the PA
Average of the 26 week high and low of the closing pricesof the shares of the target company OR average of thedaily high and low of the closing prices of the sharesduring the two weeks preceding the PA, whichever ishigher (except in case of PSU disinvestment)
Highest price paid for acquisitions subsequent to the PA
Any non compete payment in excess of 25% of offer price tobe added to offer price
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n
n Infrequently traded shares
Turnover during 6 calendar months prior to the month in which the offer is made is not less than 5% (by
number of shares)
n Pricing Mechanism
Quoted price not to be considered
Other parameters to remain
Additional criteria brought into play e.g EPS, PE multiple, BV, return on net worth
SEBI may ask for valuation by an independent Merchant Banker or an independent CA
In case of PSU disinvestment, price paid to Government to be the offer price
Exception to the Rule
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Public Announcement..
To be made not later than 4 working days of entering into anagreement
In case of indirect acquisition, PA to be made within 3 months of
consummation of acquisition / change in control / restructuring ofthe parent company
PA to be published in newspapers, submitted to SEBI and sent tothe target company & stock exchanges
PA to contain particulars specified in the Takeover Code
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General obligations of theAcquirer
n Offer to be made only when acquirer is able to implement theoffer
n Within 14 days of the PA the acquirer shall submit the draftLOF to SEBI and send to the company and stockexchanges
n All shareholders to receive the LOF within 45 days of PA
n The date of opening of the offer not later than 60 days fromthe PA
n The offer shall remain open for 30 days
n Shareholder can withdraw acceptance till upto 3 workingdays prior to the closure of the offer
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General obligations of theAcquirer
n PA and other offer documents not to contain any misleading information, tostate that the directors accept responsibility for the information contained
n Acquirer and PAC not entitled to be appointed on the board of targetcompany during the offer period except in case of PSU disinvestments
n
Any person already on the board to recluse himselfn Escrow account to be created on or before PA
n Firm financial arrangements to be made for payment of consideration anddisclosed
n Target company shares not to be acquired during the 7 working days priorto closure of offer
n All procedures relating to the offer to be completed within 30 days fromclosure of offer
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General obligations of Target
n During the offer period not to -
- Sell, transfer or otherwise dispose of the assets
- issue or allot any securities carrying voting rights
- enter into any material contracts
- appoint any nominee of the acquirer on the board- allow any nominee of the acquirer already on the board to participate
in discussions relating to the offer
n Board to facilitate the acquirer in verification of securities tendered in theoffer
n Board to transfer securities to the acquirer upon receipt of necessarycertification from the Merchant Banker
n
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n The offer price shall be payable
In cash
By issue / transfer / exchange of shares (other thanpreference shares) of acquirer company, if the
acquirer is a listed body corporate
Secured instruments of the acquirer company withminimum A grade rating
A combination of the above
Mode of payment..
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Can acquirer withdraw anopen offer once made
No, other than the following circumstances
Statutory approvals required have been refused
The sole acquirer being a natural person has died
SEBI approval in special cases
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n Bid by a any person other than the acquirer within 21days of the PA of the first offer
n No offer can be made after 21 days
n Cannot be done for PSU divestment
n No.of shares held by Competitive bidder + Competitivebid First bidder holding including the offer
n Upon a competitive bid first bidder can revise his offer
within 14 days
Competitive bid
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Open Escrow Account & complete all other formalities for making a Public AnnouncementSign Share Purchase Agreement / MoU
Copy of Public Announcement submitted to SEBI, Stock Exchanges & Target
Draft Letter of Offer and due diligence cert. filed with SEBI, Stock Exchange & Target
Not later than 14 days from the Public Announcement
SEBI to provide comments on the draft Letter of Offer
SEBI comments, if any, latest within 21 days of LOF submission
Final Printed Letter of Offer to SEBILetter of Offer to reach Shareholders
Letter of Offer to reach shareholders within 45 days of Public Announcement
Offer OpensNot later than 55 days fromthe date of Public
Announcement
Revision of price, if any (last date)Upto 7 working days prior to the offer closing
Offer Closes
Offer to remain open for 20 days
Completion of all Formalities including Payment ofconsiderationNot later than 15 days fromoffer closing
Public announcement to be published in leading newspapersIn 4 working days from the Trigger Date
Open Offer Timetable
90da
ys
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Emami - Zandu
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Emami ZanduBackground
Zandu is a manufacturer of ayurvedic medicinesunder the Zandu brand
Zandu was promoted by the Vaidya and Parikh
families and is a listed Indian Company.
As of 31 March 2008 Zandu had a sales of Rs 1,687mn, EBITDA of Rs 288 mn and PAT of 165 mn
As of March 2008, the Vaidyas held a 24% stake inthe Company and the Parikhs held 18%
Emami
nEmami is a manufacturer of ayurvedic cosmeticand healthcare products
nPromoters control almost 88% of the equity of theCompany
n
As of 31 March 2008 Emami had a sales of Rs6,180 mn, EBITDA of Rs 1,214 mn and PATof 913 mn
n
n
Emami negotiated a deal with the Vaidya family and bought them out triggering
the open offer
Emami negotiated a deal with the Vaidya family and bought them out triggeringthe open offer
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Emami Zandu
Events
Share price moves from Rs 8,127 on 30 May 2008 and went up over Rs 15,500
Date Event Per share Total(Rs mn)
29 May 2008 Emami Ltd acquires 27% stake in ZanduPharmaceuticals Works24% from the Vaidyas and ~ 3.9% fromthe market
Rs 6,900 1,531
2 June 2008 Emami announced open offer for 20%additional
Rs 7,315 1,180
6 June 2008 The Zandu Board decides against apreferential allotment to the Parikhs
16 19 June2008
The Parikhs acquire close to 2% sharesfrom the open market.
~ Average pricebetween Rs 12,000to Rs 14,500
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Emami -Zandu
Emami - Zandu Acquisition
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20-May-08 27-May-08 3-Jun-08 10-Jun-08 17-Jun-08 24-Jun-08 1-Jul-08
29 May 2008 - Emami
acquires shares from
he Vaidya Family
2 June 2008 - Emami
announces open
offer for an
addiitonal 20% stake
16 - 19 June 2008 -
Parikh family acquires
shares f rom the market
6 June 2008 - The Zandu
Board decides against a
preferential allotment to the
Parikh family
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Emami - Zandu
The Parikh Strategy
n The Parikhs chose not to make a counter offer
n The Parikhs claim to have the support of 45% of the shareholders (their own 18% and
27% of outside support.
n Can acquire up to 5% of the shares under creeping acquisition norms
n
The Emami Strategy
n Emami blocked the preferential allotment of shares by Zandu Pharmaceutical Works tothe Parikhs
n Emami may have to increase its offer price if it plans on increasing its stake as thecurrent share price is substantially higher than the offer price.Deal Result:
Eventually the Parikhs sold their stake to Emami at Rs. 16,500 per share and Emami also acquired an
additional 20% stake through the open offer taking its total stake to 69%.
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Eicher - Volvo
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Volvo EicherBackground
Eicher Motors is a listed manufacturer of commercialvehicles and two wheelers
Commercial Vehicles are manufactured under the
Eicher branding and two wheelers as Royal Enfield
n
n
nVolvo India has operations across trucks, buses,construction equipment, marine & industrialpower systems.
nVolvo has been trying to expand its presence inIndia and had been talking to a number ofIndian players
Volvo and Eicher announced a joint venture for commercial vehicles in India
Volvo and Eicher announced a joint venture for commercial vehicles in India
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Volvo Eicher
n Volvo and Eicher Motors announce a joint venture VE Commercial Vehicle Ltd
n Volvo to transfer its Indian truck business into the JV
n Eicher Motors to transfer the truck and bus business into the JV on a slump sale basis for Rs2,022 mn. The parent company is left with the Royal Enfield two wheeler business.
n Eicher Motors to have a 54.4% stake in the JV Company and Volvo to have 45.6% direct stake.
n Volvo to also take an 8.1% stake in Eicher Motors Ltd for Rs 1,574 mn at Rs 691.68 per share
n Volvo also pays a non- compete of Rs 393.5 mn each to Eicher Motors and the promoters
n The promoters of Eicher Motors have also announced plans to have a buy back of shares at thesame price as selling the stake to Volvo i.e Rs 691.68 per share, against a current share priceof Rs 278 per share.
n
n
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Eicher Motors Volvo
VE Commercial Vehicles Ltd
Volvo Eicher
54.4% 45.6% - Direct50% - Indirect
8.1% for Rs 1,574mn
Stake
Consideration
Business
Truck &
busbusiness
For Rs2,022 mn
Indian Truckbusiness
valued at US$75 mn
And Rs10,821 mn
In addition Volvo will pay Rs 393.5 mn each as non compete to bothEicher Motors and the Lals
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Volvo EicherCash flows
Payout by Volvo
For a 45.6% direct stake in VE Commercial (JV Company) Rs 10,821 mn
Non Compete Consideration to Eicher Motors & the Lals (50:50) Rs 787 mnPreferential allotment in Eicher Motors for a 8.1% stake Rs 1,574 mn
Value of Indian Truck Business transferred to VE Commercial Rs 3,000 mn
Total Payout Rs 16,182 mn
Payout by VE Commercial to Eicher Motors
Payment for transfer of truck & Bus business Rs 2,022 mn
Payment Received in JV CompanyFor a 45.6% direct stake in VE Commercial (JV Company) Rs 10,821 mn
Value of Indian Truck Business transferred to VE Commercial Rs 3,000 mn
Payment Received in Eicher Motors
Preferential allotment in Eicher Motors for a 8.1% stake Rs 1,574 mn
Non Compete Consideration to Eicher Motors Rs 393.5 mn
Payment for transfer of truck & Bus business Rs 2,022 mn
Payment Received by the Lals
Non Compete Consideration Rs 393.5 mn
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IDEA SPICE
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Idea SpiceBackground
n Spice Communications is a listed cellulartelecom player with current operations in 2circles Punjab and Karnataka
n Spice is a joint venture between B K Modi(40.8%) and Telekom Malaysia (39.2%)
n Spice had 4.5 mn subscribers in its two circles
nIdea Cellular is also a listed Indian cellular telecomplayer with operations in 11 circles andlicenses for all other circles
nThe Company is controlled by the Aditya Birla
Group with a 58% stakenIdea Cellular has 26 mn subscribers across India
Idea Cellular announced the acquisition of the stake held by B K Modi in SpiceCommunications
Idea Cellular announced the acquisition of the stake held by B K Modi in SpiceCommunications
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Idea - Spice
n Idea acquires 40.8% in Spice Communications from B K Modi
n Idea & Telekom Malaysia make an open offer for Spice Communication for
additional 20%
n Telekom Malaysia acquires a 14.99% stake in Idea Cellular through apreferential allotment
n Spice merges into Idea Cellular 49 shares of Idea for every 100 sharesin Spice
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Idea - Spice
Idea Cellular Telekom Malaysia
SpiceCommunications
Rs 21,759 mn and anadditional Rs 5,439.7mn as non- compete
+
Open offer of Rs10,666 mn
14.99%
Stake
Consideration
Rs 72,945 mn
40.8%+2
0%through
openoffer
Spice to eventually merge intoIdea Cellular
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Idea SpiceCash flows
Payout by Idea
40% stake from B K Modi Rs 21,759 mn
Non Compete Consideration to B K Modi Rs 5,439.75 mn
Open Offer for 20% of Spice Rs 10,666 mn
Total Payout (assuming 50% of Open offer taken up by Telekom Malaysia) Rs 32,532 mn
Received by Idea
Preferential allotment to Telekom Malaysia Rs 72,994.75 mn
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Idea SpiceChange in Shareholding
Spice CommunicationsCurrent
BK Modi 40.8%
Telekom Malaysia 39.2%
Others 20%
Post acquisition
Aditya Birla Group 40.8%
Telekom Malaysia 39.2%
Others 20%
Post Open offer (assuming half acceptance)
Aditya Birla Group 45.8%
Telekom Malaysia 44.2%
Others 10%
Post Merger
Spice Merges into Idea
Idea CellularnCurrent
-Aditya Birla Group 58%
-Others 42%
nPost Acquisition-Aditya Birla Group 58%
-Others 42%-
nPreferential Allotment-Aditya Birla Group 49%
-Telekom Malaysia 14.99%
-Others 36%
nPost Open offer-Aditya Birla Group 49%
-Telekom Malaysia 14.99%
-Others 36%
nPost Merger-AB Group 47.1%
-TMI 19.1%
-Others 33.8%
he above calculations have been done on the assumption that the Spiceopen offer is f subscribed upto 50% and also that the participation of
Idea and TMI in the open offer is 50:50The above calculations have been done on the assumption that the Spice
open offer is f subscribed upto 50% and also that the participation of
Idea and TMI in the open offer is 50:50
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Grasim - L&T deal
Demerger scheme compliant with tax provisions
Grasim with 51% shareholding acquires control of Cemco
L&T management gets control of 15% (held through the Trust) stake previously held
by Grasim
Transaction between L&T / Trust and Grasim almost cash neutral
The deal