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Takeover & Open Offer

A takeover Offer is a type of action in which a an offer is being made to acquire another Listed Company. It could be made by an Individual or a Group or Any Legal Entity, which is known as the acquirer, while the subject matter of the bid is referred to as the target company. The takeover Offer could be a Friendly offer or could be a Hostile Offer.

Securities and Exchange Board of India (substantial acquisition of shares and Takeovers) Regulations, 2011 is the primary piece of Law which regulates Takeovers of Listed Companies in India.

An Open Offer is made to the Public shareholders of Target Company pursuant to a Trigger event as prescribed in regulations to provide them an Exit Opportunity in case the Public shareholders are not willing to continue with the Company and/or upcoming Management pursuant to Takeover Offer.

A Merchant Banker called as Manager to the Offer is a Registered Intermediary who make sure that SEBI (SAST) Regulations are well complied in the Offer and in addition act to prevent any loss to any Public shareholder.

  1. Improve Book Value, Earning Per Share and Return on Equity
  2. Enhance Long- Term Shareholder value
  3. Signaling Effect
  4. Takeover Defence
  5. Capital Market Allocation
  1. Total DEBT to Equity Ratio should not exceed 2:1 post buy back.
  2. The company shall not raise further capital for a period of one year from the expiry of buy back period.
  3. The promoters or his/their associates shall not deal in the shares from the date of passing the resolution of the board of directors or the special resolution, as the case may be, till the closing of the offer.
  4. Company shall not make any offer of buy-back within a period of one year reckoned from the date of expiry of buy back period of the preceding offer of buy-back, if any
  1. The buy-back is authorised by the company’s articles.
  2. The maximum limit of any buy-back shall be 25% or less of the aggregate of paid-up capital and free reserves of the company.
  3. A special resolution required to be passed at a general meeting of the company authorizing the buy-back if buy-back is exceed 10% of paid-up equity capital and free reserves of the company.
  4. Company shall not make any offer of buy-back within a period of one year reckoned from the date of expiry of buy back period of the preceding offer of buy-back, if any

Steps in Open Offer :

  1. Appointment of Merchant Banker
  2. Trigger Event (Share Purchase Agreement/ Resolution for allotment of Securities/ Acquisition of Shares beyond Threshold)
  3. Submission of Public Announcement
  4. Escrow Account For takeover transaction
  5. Publication of Detailed Public Statement
  6. Public Announcement of Open Offer
  7. Recommendation by the BOD of the target company
  8. Filing of Letter of Offer with the SEBI
  9. Incorporation of Observations of SEBI
  10. Dispatch of Offer Document/ Letter of Offer to shareholders
  11. Opening of Offer
  12. Post offer advertisement
  13. Settlement through Special Escrow Account.
  14. Acquisition of shares and submission of Post Offer Monitoring report

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