The take over code analysis

1. New Take over code
 Effective from 22nd October 2011

2. INTRODUCTION
 The Securities and Exchange Board of
India (“SEBI”) introduced the SEBI
(Substantial Acquisition of Shares and
Takeovers) Regulations, 1997
("Takeover Code, 1997") to regulate the
acquisition of shares and voting rights
in public listed companies in India

3. MEANING OF TAKEOVER
 a transaction or a series of transactions whereby a person acquires
control over the assets of a company, either directly by becoming
the owner of those assets or indirectly by obtaining control of the
management of the company. Where shares are closely held (i.e. by
small number of persons), a takeover will generally be effected by
agreement with the holders of the majority of the share capital of the
company being acquired. Where the shares are held by the public
generally the take over may be effected:
 1) by agreement between the acquirers and the controllers of the
acquired company.
 2) by purchase of shares on the stock exchange.
 3) by means of a takeover bid

4. APPLICABILITY
 APPLICABILITY
 direct or indirect acquisition of shares or
voting rights in or control over any target
company.

5. PREFERENCE SHARES
 Takeover code 1997 excluded Preference
shares from the definition of shares vide
2002 amendment.
 Now in amendment 2011, the same has
been included any security which entitles
the holder to voting rights

6.  The Takeover Code, 2011 defines
acquisition as “directly or indirectly,
acquiring or agreeing to acquire shares or
voting rights in, or control over, a target
company” (“Acquisition”).

7. MAJOR CHANGES
 1. The point at which the open offer is
triggered has been changed from the
earlier 15% to 26%. 2. The size of the
open offer has been increased from 20%
to 25%. 3. Non-compete fees which were
paid earlier to promoters is now not
permitted

8. Difference between New take over
code and old code
 open offer trigger  Open offer trigger
above 25% above 15%
 Open offer size  Open offer size 20%
increase to 26%  Creeping acquisition
 Creeping Acquisition allowed 5% for
5% allowed to promoters holding
promoters up to 75% between 15-55%
 Scrapping of Non  Non compete fees for
compete fees to promoters Allowed
promoters

9. “deemed to be acting in concert
 Takeover Code, 1997 included a company
with any of its directors, or any person
entrusted with the “management of the
funds” of the company.
 Take over code 2011 widens scope to
such persons as may be entrusted with
the management of the company

10.  Promoter allowed  Promoter not allowed
voluntary open offer voluntary open offer
up to 10% to increase
holding
 57 days to complete
open offer

11. Voluntary offer
 A concept of voluntary offer has
introduced in Take over code 2011

12. Advantages to investor
 Minorities shareholders  Promoters would get Non
get fair share in open compete fees
offer  NO exemption in case of
 Companies get 51%
acquisition from other
holding in the new
company competing acquired
 Promoters get voluntary  Changes of control only
open offer to increase the after open offer
holding  Frequently traded shares
 Board recommendation increase from 5 % to 10
made compulsory for % for more realistic
open offer picture

13. OFFER SIZE
 Take over code 1997 to make an open offer, to
offer for a minimum of 20% of the „voting capital
of the Target Company‟ as on „expiration of 15
days after the closure of the public offer‟.
 Take over code 2011 an acquirer to place an
offer for at least 26% of the „total shares of the
Target Company‟, as on the „10th working day
from the closure of the tendering period‟.

14. OFFER PERIOD
 The Takeover Code, 2011 provides that the offer
period starts on the date of entering into an
agreement to acquire shares, voting rights in, or
control over a Target Company requiring a
public announcement, or the date of the public
announcement, whichever is earlier and ends on
the date on which the payment of consideration
to shareholders who have accepted the open
offer is made.

15.  Cost increases for the corporate to take over
 If the indirectly acquired target company is a
predominant part of the business or entity being
acquired, the takeover code would treat such
indirect acquisition as a direct acquisition for all
purposes.

16.  Offer price paid would be highest among 4 prices that
are as follows
 negotiated price
 volume weighted average price over the last 52 weeks
prior to the public announcement
 the highest price payable or paid in the last 26 weeks
before the public announcement,
 the volume weighted average price of 60 trading days
prior to the public announcement.

17. Thank you