SEBI Amends Rules To Make Mergers And Acquisitions Easier

To make mergers and acquisitions transactions easier for listed entities, markets regulator Securities and Exchange Board of India (SEBI) has amended rules related to it.

It said through a note that rules pertaining to delisting of equity shares of a company following an open offer have been amended in an effort to make merger and acquisition transactions for listed companies more convenient.

To implement these rules, SEBI has amended the SAST (Substantial Acquisition of Shares and Takeovers) Regulations. These rules came into effect from Monday, December 6.

Under the new framework, promoters or acquirers need to disclose their intention to delist the firm through an initial public announcement, the SEBI notification said.

If the acquirer is desirous of delisting the target company, the acquirer must propose a higher price for delisting with suitable premium over open offer price, it said.

In case the open offer is for an indirect acquisition, the open offer price and indicative price will be notified by the acquirer at the time of making the detailed public statement and in the letter of offer.

"The indicative price shall include a suitable premium reflecting the price that the acquirer is willing to pay for the delisting offer with full disclosures of the rationale and justification for the indicative price so determined that can also be revised upwards by the acquirer before the start of the tendering period," the notification said.

In the existing framework, if an open offer is triggered, compliance with takeover regulations could take the incoming acquirer's holding to above 75 per cent or perhaps even 90 per cent.

However, to ensure compliance with the Securities Contract (Regulation) Rules, the acquirer would be forced to first bring his stake down to 75 per cent as the Sebi delisting norms would not let the acquirer even to attempt at delisting unless the holding is first brought down to 75 per cent.

The revised framework aims to make merger and acquisition (M&A transactions) for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process.

In the new framework, SEBI said that if the response to the open offer leads to the delisting threshold of 90 per cent being met, all shareholders who tender their shares would be paid the indicative price.

In case the response to the offer leads to the delisting threshold of 90 per cent not being met, all shareholders who tender their shares would be paid the open offer price.

If a company does not get delisted following an open offer under this framework, and the acquirer crosses 75 per cent due to the open offer, a period of 12 months from the date of completion of the open offer will be provided to the acquirer to make further attempts to delist the company using the reverse book building mechanism.

Such further delisting attempt will be successful if 50 per cent of the residual public shareholding is acquired and delisting threshold is met.