SEBI to ease takeover norms for cos with superseded boards
Move aimed at facilitating takeover of Satyam.
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Easing the path
The SEBI amendments also said that no competitive bid shall be made once an
acquirer has made a public announcement for an open offer after having obtained
relaxation in the takeover regulations.
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Our Bureau
Mumbai, Feb 13 SEBI said it would ease its takeover regulations for companies
whose boards have been superseded and replaced by the Government or other
regulatory authority, smoothening the way for a possible sale of Satyam
Computer, the only company that currently fits this description.
The regulator will provide relaxation under provisions of chapter III of the
takeover regulations, according to SEBI's amendments announced on Friday.
Chapter III relates to, among other matters, the timing, pricing and size of
open offers by acquiring companies.
The amendment itself was considered by SEBI after the board of Satyam made a
request for it. It was felt that any potential buyer for Satyam would baulk at
the open offer price that would have to be paid for the company, because of the
enormous fall in its market price after its founder admitted to a fraud in the
company. (The open offer price takes into account the market price of the last
six months.)
The SEBI amendments also said that no competitive bid shall be made once an
acquirer has made a public announcement for an open offer after having obtained
relaxation in the takeover regulations.
(Current regulations permit a public announcement from a competitive bidder
within 21 days of the public announcement of the first or original bidder.)
To consider granting relaxation, SEBI must also be satisfied that the directors
have devised a plan which provides for transparent, open and competitive
process for the continued operation of the target company. This process must be
in the interest of all stakeholders and must not further the interests of any
particular acquirer, said SEBI.
The regulator must also be convinced that the competitive process is reasonable
and fair, and that the process provides for details including the time when the
public offer would be made and completed, and the manner in which change in
control would be effected.
It is up to the target company's board to satisfy SEBI that the takeover
provisions are likely to act as an impediment to its plan, and that their
relaxation would be in the public interest.
The entire scheme is designed to remove regulatory bottlenecks for getting a
suitable eligible bidder who can continue the operations of the target company,
said a legal expert.
A competitive bid is being blocked because SEBI wants the acquirer to have gone
through the scanner of the board of the target company, since the conditions
are not of an ordinary nature.
Since SEBI must be satisfied with the process too, clearly price itself is not
the only issue.
And, although it appears that the board of the target company needs to consult
SEBI for relaxation only when open offer conditions are triggered, it may have
to seek SEBI approval at every stage of sale, including any initial sale of
shares, since the regulator must be satisfied with the process too, said the
legal expert.
There is a possibility that SEBI may want to consider whether the initial sale
of shares to a buyer (even before the open offer stage is reached) is priced
right, taking in view the networth of the company and also the contingent
liabilities it may face from overseas litigation.
There is a possibility that more than one eligible bidder may be thrown up by
the process. It is not known then whether SEBI would be the final authority in
choosing the ultimate buyer.
It is not clear how easily these regulations might help in a case which is not
so clear cut as Satyam's, where the promoter himself admitted to fraud, said
legal experts
http://www.thehindubusinessline.com/2009/02/14/stories/2009021451930100.htm
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