SEBI panel suggests rewriting takeover rules

A SEBI panel on takeover rules recommended a complete rewrite of regulations. The recommendations include raising the public offer trigger to 25%, from 15%; obligation on any acquirer to buy out all minority shareholders instead of just 20%; introducing the ability to control concept; doing away with non-compete fees, and improving the definition of indirect control of companies. The market regulator can exempt buyers from offers based on conditions that have been laid out. C. Achuthan, former presiding officer at the Securities Appellate Tribunal (SAT), submitted the report to SEBI chairman CB Bhave.



"The philosophy of equitable and fair treatment of all shareholders should have a primacy over other considerations," said the report. The regulator will take a decision on implementing the suggestions after receiving comments from public till end-August. It has the right to implement, or reject, any of the recommendations.

It has also suggested that if an acquirer ends up with more than the minimum required holding for listing, he could either gradually raise the public holding to 25% or delist the company by buying out the rest at the offer price. The determination of offer price may also be relaxed to just about 12 weeks of volume weighted average of the market price, instead of the higher of 26 weeks average.

SEBI's proposed new takeover code will adversely impact M&A activity by raising the cost of acquisitions. At the same time, a few proposals could lead to increased takeover opportunities in Indian companies. The new takeover rules might also result in a slew of open-market purchases by promoters as they try to ward off the threat from hostile takeovers.