SEBI TAKEOVER REGULATIONS 2011

SEBI TAKEOVER
REGULATIONS, 2011

EVOLUTION
BEFORE
1992
1992
1994
1995
1997
2009
2011

PRE CONDITION / APPLICABILITY
ACQUISITION OF
SHARES,
CONTROL,
or
VOTING RIGHTS
TARGET
COMPANY
WHOSE SHARES
CONTROL
VOTING RIGHTS
ARE ACQUIRED
MUST BE LISTED
ON STOCK
EXCHANGE IN
INDIA

TYPES OF TAKEOVER
LEGAL
CONTEXT
HOSTILE
DIRECT INDIRECT
FRIENDLY
NEGOTIATED BAILOUT

ACQUIRER + PAC
attempt for Friendly Takeover

ATTRACTIVE TARGET + NOT SO ATTRACTIVE
ACQUIRER = NEGOTIATION FAILED

TYPES OF TAKEOVER
BUSINESS
CONTEXT
INTEGRATION
VERTICAL HORIZONTAL
DIVERSIFICATION
CONGLOMERATE

• Add your first bullet point here
• Add your second bullet point here
• Add your third bullet point here
COGENERIC INTEGRATION

DEFINITIONS
• TARGET COMPANY : means & includes body corporate or a company which is
listed on a stock exchange in India and whose shares are acquired or intended to be acquired
by any acquirer.

DEFINITIONS
• ACQUIRER : means any person who directly or indirectly acquires or agrees to acquire
whether by himself or through or with person acting in concert with him, shares or voting
rights or control over target company.

DEFINITIONS
• PERSON ACTING IN CONCERT : means persons who, with a common objective
or purpose of acquisition of shares or voting rights in, or exercising control over a target company,
pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for
acquisition of shares or voting rights in, or exercise of control over the target company.

DEFINITIONS
• DEEMED PERSON ACTING IN CONCERT:
i. Company, its holding company, subsidiary company & companies under
same management or control
ii. a company, its directors, and any person entrusted with the management of
the company
iii. promoters and members of the promoter group
iv. immediate relatives
v. MF/ VCF/ CIS / AIF, its sponsor, trustees, trustee company, and asset
management company
vi. a merchant banker / portfolio manager and its client, who is an acquirer
vii. Investment Co. / Fund and such person who has an interest @ 10% of the
paid up capital or unit – NA for Mutual Funds registered with SEBI
viii. banks, financial advisors and stock brokers of the acquirer*
* not apply to a bank whose sole role is that of providing normal commercial banking services

DEFINITIONS
• SHARES:
 MEANS ~ EQUITY SHARE
CAPITAL OF TARGET COMPANY
 INCLUDES ~ ANY SECURITY
WHICH ENTITLES THE HOLDER
TO EXERCISE VOTING RIGHTS

DEFINITIONS
• CONTROL:
includes the right to appoint majority of the directors or to
control the management or policy decisions exercisable by a
person or persons acting individually or in concert, directly or
indirectly, including by virtue of their shareholding or
management rights or shareholders agreements or voting
agreements or in any other manner.
Provided that a director or officer of a target company shall not
be considered to be in control over such target company,
merely by virtue of holding such position;

DEFINITIONS
ACQUISITION means
DIRECTLY
INDIRECTLY
ACQUIRING
AGREEING TO ACQUIRE
SHARES
CONTROL
VOTING RIGHTS
OF TARGET COMPANY

AREAS OF TAKEOVER CODE
DISCLOSURES
OPEN OFFER PROCESS & COMPLIANCE
EXEMPTIONS FROM OPEN OFFER

DISCLOSURES
EVENT BASED
CONTINUAL / ANNUAL
ENCUMBRANCE

EVENT BASED DISCLOSURE
• Reg. 29 (1) : INTITIAL LIMIT 5%
• Reg. 29 (2) : EXISTING HOLDING >5%
CHANGE IN SHAREHOLDING + 2%
SHAREHOLDING FALLS BELOW 5 %
<5% >5% &
+ 2%

Made by ACQUIRER only
@
EVERY STOCK EXCHANGE WHERE THE
SHARES ARE LISTED
&
REGISTERED OFFICE OF THE TARGET
COMPANY
Within 2 working days of the receipt of
intimation of allotment of shares or the
acquisition of shares or voting rights
EVENT BASED DISCLOSURE

Reg. 30 CONTINUAL DISCLOSURES
DISCLOSURE OF SHAREHOLDING
as on 31st March
i.e. at the end of Financial year

Within 7 working days
from the end of each financial year
to be given to
Every Stock exchange where the shares of the Target Company
are listed
&
Registered Office of the TARGET COMPANY

To be made by
PROMOTERS NON
PROMOTERS
IRESPECTIVE
OF THE
SHAREHOLDING
ANY PERSON
along with PAC
Holding more than
25% shares

Reg. 31 ENCUMBERED SHARES
• A claim against a property by another party.
• Encumbrance usually impacts the transferability of
the property and can restrict its free use until the
encumbrance is removed.
• For TAKEOVER REGULATION - It includes a
pledge, lien, or any transaction which creates a the
risk on the ownership of shares of the promoters

PROMOTER of every target company shall disclose details of
shares in such target company:
Creation of Encumbrance of shares of Target Company
Invocation or Release of the encumbrance of shares

Disclosure is to be made
Within 7 working days from the date of creation/invocation
of pledge
TO
Every stock exchange where the shares of the target
company are listed
Registered office of the target company

DISCLOSURE REQUIRED OR NOT ?
P
XYZ
Ltd.
Q
1. Already holds 4% shares
3.
Loan of Rs. 5 Crore
For 3 months
4.
Pledges
3% shares
of XYZ
Ltd.
YE
S

DISCLOSURE REQUIRED OR NOT ?
SBI
XYZ
Ltd.
Q
3.
Loan of Rs. 5 Crore
For 3 months
4.
Pledges
3% shares
of XYZ
Ltd.
NO

CASE IN POINT CONCLUSION
Company XYZ
Ltd.
100 Equity
Share
50
PCD
10
GDR
160
Total
Share
110
Total voting rights
DISCLOSURE
Current Holding
of
A in XYZ
8
Equity
Shares
7
PCD
1
GDR
16 (8+7+1)
Shares
16/160 = 10%
9 (8 +1)
Voting rights
9/110 = 8%
N.A.
Scenario I
2
Equity
Shares
2
PCD
----
2+2=4
shares
4/160 = 2.5%
2 Voting Right
(only on Sh.)
2/110= 1.81%
Reg. 29(2)
Shareholding
> 2%
Scenario II --- 20
PCD
---
20 shares
20/160 = 12.5%
No
Change in
Voting Rights
Reg. 29(2)
Shareholding
> 2 %
Scenario III
2 Equity
Shares --- ---
2 Shares
2/160 =
1.25 %
2 Voting Right
2/110 =
1.81 %
No Disclosure
Change is
< 2%
Scenario
IV
3
Equity
Shares
--- ---
3 Shares
3/160 =
1.87%
3 Voting Right
3/110 =
2.72 %
Reg. 29(2)
Voting Rights
> 2%

DISCLOSURE CONCLUSION
ACQUISITION > 5%
CHANGE + 2 %
DISPOSAL
RESULTING
< 5%
PROMOTER & PAC irrespective of
shareholding
Others holding > 25%
On
CREATION
INVOCATION
RELEASE
of
ENCUMBRANCE
by
PROMOTERS

NO OBLIGATION ON THE TARGET COMPANY TO GIVE ANY DISCLOSURE
OBLIGATION IS ONLY ON ACQUIRER, PROMOTER & THEIR PACs
ACQUISITION INCLUDES SHARES ACQUIRED BY WAY OF ENCUMBRANCE*
* not applicable on Scheduled Commercial Banks or PFI acquiring shares by way of pledge
DISPOSAL INCLUDES SHARES GIVEN UPON RELEASE OF ENCUMBRANCE*
* not applicable on Scheduled Commercial Banks or PFI release of shares by way of pledge
DISCLOSURE to R.O. of TARGET COMPANY &
Every Stock Exchange where the shares of the Target Company are listed.

Reg. 3 : SUBSTANTIAL ACQUISITION OF SHARES OR
VOTING RIGHTS
TRIGGER LIMIT /
PUBLIC
AMMOUNCEMENT
1st LEVEL / INITIAL
TRIGGER
2nd LEVEL / CREEPING
ACQUISITION TRIGGER

1st LEVEL TRIGGER
 Any acquirer, along with PAC (if any)
Reg. 3(1)
 Casts an obligation on the acquirer to make public announcement of an open
offer for acquisition of additional 26% shares of Target Company
 while acquiring shares of the Target Company
 where by pursuant to such acquisition
 their post acquisition holding in the Target company
 Reaches or Exceeds 25% of the voting rights in such target company
 then initial trigger is said to be touched by such acquirer
As per Reg. 7(1)
prior acquiring such shares, entitling him to exercise 25% or more
voting rights in such Target Company.

CREEPING ACQUISITION
• Any acquirer who along with his PAC hold 25% or more voting rights in the Target Company can
acquire additional maximum 5% shares of the Target Company during any financial year without
attracting the obligation to make an open offer under the Takeover regulations
Ex.
 Mr. Ambani hold 28 % shares in East India Hotels Ltd. (EIH) as on 01/04/2015.
 Now for the financial year 2015 – 2016, he can acquire max. 5% more shares of company i.e. 28% + 5% = 33%
 However in next financial year 2016 – 2017, he can further acquire additional 5% shares of EIH Ltd.
i.e. 33% + 5% = 38% & so on

2st LEVEL TRIGGER
 Any acquirer, along with PAC (if any)
 who has already acquired 25 % or more shares of the Target Company
 shall not acquire more than 5% shares of such Target company within any financial year
(starting April 1st)
 without making prior public announcement of an open offer
 for acquiring additional 26% shares of Target Company
As per Reg. 7(1)
PROVIDED THAT
 Post acquisition holding of such acquirer together with its PAC must not exceed the
maximum permissible non – public shareholding.
 Thus maintaining the minimum public float of 25% in such Target company.
As per Reg. 3(2)

ACQUISITION OF
ADDITIONAL VOTING RIGHTS
• For the purpose of determining the acquisition of additional voting rights
GROSS ACQUISITIONS made by the acquirer along with PAC must be
taken into consideration.
Ex.
 Rajiv’s stake in Bajaj Ltd. was 42% as on 01/04/2015
 He purchased 3% shares in April’15 (42 + 3 = 45%)
 He sold 3% shares in May’15 (45 – 3 = 42%)
 He purchased 3% shares in June’15 (42 + 3 =
45%)
Assuming that these were the only 4 transactions that were entered by Rajiv.
IS THE TRIGGER TOUCHED ?
YES. Since his gross acquisition has exceeded 5% (i.e. 3% in April & May
each) even though his aggregate holding is same.
 He sold 3% shares in July’15 (45 – 3 = 42%)

ACQUISITION OF
ADDITIONAL VOTING RIGHTS
• in the case of acquisition of shares by way of issue of new shares by the target company
or where the target company has made an issue of new shares in any given financial
year, the difference between the pre-allotment and the post-allotment percentage
voting rights shall be regarded as the quantum of additional acquisition .
POST ALLOTMENT
PRE ALLOTMENT
CHANGE IN VOTING RIGHTS
UP TO 5 % MORE THAN 5 %
NO PUBLIC ANNOUNCEMENT
PUBLIC ANNOUNCEMENT
TRIGGER IS TOUCHED

Reg. 6: VOLUNTARY OPEN OFFER
Pre Conditions:
 Prior holding of at least 25% or more of voting
rights in the Target Company.
 No acquisition was made in the preceding 52
weeks without attracting the obligation to make an
public announcement to make an open offer.
i.e. NO CREEPING ACQUISITION
 Minimum offer size of 10 %
 No acquisition of shares during the offer period
except under the open offer
 No further acquisition of shares for a period of 6
months after the completion of open offer except by
way of another voluntary open offer or competing
offer

Reg. 7: OFFER SIZE
OPEN OFFER UNDER OFFER SIZE
(% of shares of the Target Co.)
Reg. 3 & 4 –
COMPULSORY OFFER 26 %
Reg. 6 –
VOLUNTARY OFFER 10 %
SHARES AS ON THE DATE OF PUBLIC ANNOUNCEMENT IS NOT RELEVANT
BUT MAINTAIN THE MINIMUM PUBLIC FLOAT
&
IF PRIOR PUBLIC ANNOUNCEMENT WAS NOT MADE TO DELIST THE SHARES
ACQUIRER CANNOT VOLUNTARILY DELIST THE SHARES OF TARGET Co.
FOR A PERIOD OF 12 MONTHS
FROM THE DATE OF COMPLETION OF OFFER PERIOD

Reg.8 : OFFER PRICE
OFFER PRICE
DIRECT
ACQUISITION
FREQUENTLY
TRADED
SHARES
INFREQUENTLY
TRADED
SHARES
INDIRECT
ACQUISITION

FREQUENTLY TRADED SHARES
vs.
INFREQUENTLY TRADED SHARES
Shares of a target company,
in which the traded turnover on any stock exchange
during the 12 calendar months
preceding the calendar month
in which the public announcement is made,
is at least 10% of the total number of shares
of such class of the target company
– 12
months
PUBLIC
ANNOUNCEMENT
– 1
month
JUNE
2015
JULY
2015
JULY
2014
10% of Total No. of Shares

OFFER PRICE
DIRECT ACQUISITION
FREQUENTLY TRADED SHARES
• highest negotiated price per share of the target company for any acquisition under the agreement
attracting the obligation to make a public announcement of an open offer
• volume-weighted average price paid or payable for acquisitions, whether by the acquirer or by any
person acting in concert with him, during the fifty-two weeks immediately preceding the date of the
public announcement
• highest price paid or payable for any acquisition, whether by the acquirer or by any person acting in
concert with him, during the twenty-six weeks immediately preceding the date of the public
announcement
• the volume-weighted average market price of such shares for a period of sixty trading days
immediately preceding the date of the public announcement as traded on the stock exchange where the
maximum volume of trading in the shares of the target company are recorded during such period
HIGHEST OF FOLLOWING

OFFER PRICE
DIRECT ACQUISITION
INFREQUENTLY TRADED SHARES
• highest negotiated price per share of the target company for any acquisition under the agreement
attracting the obligation to make a public announcement of an open offer
• volume-weighted average price paid or payable for acquisitions, whether by the acquirer or by any
person acting in concert with him, during the fifty-two weeks immediately preceding the date of the
public announcement
• highest price paid or payable for any acquisition, whether by the acquirer or by any person acting in
concert with him, during the twenty-six weeks immediately preceding the date of the public
announcement
• the price determined by the acquirer and the manager to the open offer taking into account
valuation parameters including, book value, comparable trading multiples, and such other
parameters as are customary for valuation of shares of such companies
HIGHEST OF FOLLOWING

CAN THE ACQUIRER ESCAPE OBLIGATION FOR
OPEN OFFER BY REDUCING HIS SHAREHOLDING
BELOW 25 % OR 5%

OPEN OFFER PROCESS
Reg. 12
PRIOR MAKING
PUBLIC ANNOUNCEMENT
Acquirer must appoint a SEBI
Registered Merchant Banker
+
P.A. of the open offer must be
made through such Merchant
Banker only

OPEN OFFER PROCESS
• MARKET PURCHASES
Prior placement of order with Stock Broker
• UPON CONVERSION OF CONVERTIBLE SECURITIES:
– WITHOUT FIXED DATE OF CONVERSION
on the same day as the date of conversion
– WITH FIXED DATE OF CONVERSION
2nd Working day preceding the date of such
conversion
• PREFERENTIAL ISSUE
Date on which the BOD authorizes the Pref. Issue
Reg. 13 : TIMING OF PUBLIC ANNOUNCEMENT

OPEN OFFER PROCESS
• DISINVESTMENT
On the SAME DAY of executing the Agreement for Acquisition of
Shares/Voting Rights/Control over the Target Co.
• CONSEQUENT TO BUY BACK
If not qualified for Exemption,
then not later than 90th day from the date of closure of Buy Back
• BEYOND THE CONTROL OF ACQUIRER
Within 2 working days from the date of receipt of intimation of having
acquired such title

OPEN OFFER PROCESS
• VOLUNTARY OPEN OFFER
On the same day as the date on which the acquirer takes decision to
voluntarily make a Public Announcement of an open offer for acquiring
shares of Target Co.
• INDIRECT ACQUISITION:
– Conditions of Reg. 5(2) are not met:
Within 4 working days from the date of acquisition
– Conditions of Reg. 5(2) are met:
Date of Primary acquisition is contracted / Intended
 AGREEMENT
- On the same day of executing the agreement.

OPEN OFFER PROCESS
DETAILED PUBLIC STATEMENT
DATE OF PUBLIC ANNOUNCEMENT
Within 5 Working Days

OPEN OFFER PROCESS
Public Announcement
• All Stock Exchanges where the shares of the Target Co. are
listed
• SEBI
• Registered office of the Target Company

OPEN OFFER PROCESS
DPS
• All Stock Exchanges where the shares of the Target Co. are
listed
• SEBI
• Registered office of the Target Company
– One English National Daily
– One Hindi National Daily
– One Regional Lang. where the R.O. of Target Co. is
situated
– One Regional Lang. of Stock Exchange where the max.
volume of trading in the shares of the Target Co. are
recorded.
FOLLOWING NEWSPAPER:

OPEN OFFER PROCESS
CONTENT OF PUBLIC ANNOUNCEMENT
– Name & Identity of Acquirer and PAC
– Name & Identity of the sellers
– Nature of proposed acquisition of shares/control/voting rights of Target Co.
– Consideration for the proposed acquisition that attracted the obligation to make an open
offer
– Offer Price & mode of payment of consideration
– Offer size, and conditions as to minimum level of acceptances, if any
Detailed Public Statement shall contain such information as may be specified in order
to enable shareholders to make an informed decision with reference to the open offer
PA /DPS shall not omit any relevant information, or contain any misleading info.

OPEN OFFER PROCESS
Reg. 16: FILING OF DRAFT LETTER OF OFFER TO SEBI
• WITHIN 5 WORKING DAYS
• from the DATE OF Detailed Public Statement / Upward Revision
• Along with Non Refundable Fees calculated as per the consideration payable including any upward
revision (if any)
CONSIDERATION PAYABLE FEES (₹)
Upto ₹10 Crore 1,25,000
More than 10 Crore
BUT
Upto ₹ 1,000 Crore
1,25,000
+
0.025 % of offer size above ₹ 10 Crore
More then ₹1,000 Crore
BUT
Upto ₹ 5,000 Crore
1,25,00,000
+
0.03125 % of offer size above ₹1,000 Crore
More than ₹5,000 Crore
2,50,00,000
+
0.01 % of offer size above ₹5,000 Crore;
Subject to max. of ₹ 3,00,00,000

OPEN OFFER PROCESS• SEBI shall give its comments on the draft letter of offer
within 15 days
• If no Comments is received – assume no comments
• If SEBI specifies any changes
– the period for issuance of comments shall be extended to 5th
working day
&
– manager to open offer shall carry out such changes in the
Letter of Offer before it is dispatched to the shareholders.
 In case of Competing offer : Same day

OPEN OFFER PROCESS
Reg. 18 (1)
Simultaneously file the Draft Letter of Offer to:
• Registered Office of the TARGET COMPANY
• All Stock Exchanges where the shares of the Target Co. are listed

Reg. 17
ECROW ACCOUNT
• To be opened at least 2 working days PRIOR to Detailed Public Statement
• Objective : Security Performance of his obligations under Takeover Regulations
• Can be deposited in any of the following form:
• CASH deposited with Scheduled Commercial Bank
• BANK Guarantee issued in favour of the manager of the Open Offer
• Deposit of Frequently Traded & Free transferable equity shares or other freely transferable securities
with appropriate margin
• In case of Bank Guarantee / Deposit of Securities : Acquirer shall deposit in CASH with scheduled
commercial bank at least 1% of total consideration.
• In case of Shares / Securities – in the event of any shortfall in the amount required to be
maintained in the ESCROW A/C – Manager to the open offer shall be liable to make good such
shortfall.

QUANTUM OF ESCROW
CONSIDERATION PAYABLE UNDER THE
OPEN OFFER ESCROW AMOUNT
UP TO ₹500 Crore
25% of the amount of consideration
On Balance Consideration
₹ 125 Cr.
+
10% of the consideration above ₹ 500 Cr.
In case of
CONDITIONAL OFFER
100% of the Minimum Level of Acceptance
OR
50% of the Consideration Payable
(Whichever is Higher)

RELEASE OF ESCROW
 The manager to the open offer shall not release the escrow account until the expiry of thirty days
from the completion of payment of consideration to shareholders.
 The money deposited in the ESCROW A/C shall be released only in the
following manner:-
1) Withdrawal of offer in terms of Regulations 23
2) For transfer of an amount not exceeding 90% of Escrow to Special Escrow Account
3) Balance 10% to the acquirer on the expiry of 30 days from the completion of all
obligations under the offer
4) The entire amount to the acquirer on the acquirer on the expiry of 30 days from the
completion of all obligation under the offer where the open offer is for exchange of
shares or other secured instruments.

FORFEITURE OF ESCROW FOR NON-FULFILLMENT
OF ANY OF THE OBLIGATIONS UNDER THESE
REGULATIONS
1/3
Each to:
TARGET COMPANY
IPEF ACCOUNT
SHARE HOLDERS on
Pro Rata Basis

DISPATCH OF LETTER OF OFFER
• to the Shareholders whose name appear on the Register of
Members of Target Company as on the “identified date”
• Within 7 working days from the receipt of comments from
SEBI as per Reg. 16(4)
• the acquirer shall send the letter of offer to the custodian of
shares underlying depository receipts, if any, of the target
company

TENDERING PERIOD
means
the period within which shareholders may tender their
shares in acceptance of an open offer to acquire
shares made under these regulations
&
Must commence
Within 12 Days from the
Date of Receipt of Comments
from SEBI Under Reg. 16(4)

3 days Prior to Tendering Period
Acquirer shall not BUY / SELL shares of Target Company
No Upward Revision
TO DO
PRE -TENDERING PERIOD

TO DO
– 2 day Prior to Tendering Period
Release of opinion of Independent Directors of Target company

TO DO
– 1 day Prior to Tendering Period
Acquirer shall give newspaper advertisement for
the commencement of Tendering Period
 Schedule of activities for open offer
 Status of Statutory & other approvals
 Any other conditions ( if any )
 Procedure for Tendering Acceptances
 Any other material disclosure w.r.t Tendering process

COMMENCEMENT OF TENDERING PERIOD

DURING TENDERING PERIOD
DAY 1 to DAY 10
– Share holders of the Target Company
&
– Any other person holding shares
Can surrender / tender shares to acquirer pursuant to
open offer.
 Once the shares are tendered under the Open offer,
the share holder will not be entitled to
withdraw such acceptance.

DURING TENDERING PERIOD
DAY 1 to DAY 10
ACQUIRER has to disclose
Within 24 hours
of
acquisition of shares
of Target Company
to
Every STOCK EXHANGE where the shares of the Target Company
are listed
&
Registered Office of Target Company

TENDERING PERIOD ENDS
10th DAY

OFFER PERIOD ENDS
PAYMENT OF PURCHASE CONSIDERATION
+
TRANSFER OF SHARES TO THE ACQUIRER

POST OFFER PERIOD
WITHIN 5 WORKING DAYS
POST OFFER ADVERTISEMENT
 Aggregate number of shares tendered
 Aggregate number of shares accepted
 Date of Payment of Purchase Consideration
Simultaneously,
File the same to
i. SEBI
ii. STOCK EXCHANGES, where the shares are listed
iii. Registered Office of the Target Company

Reg.19
CONDITIONAL OFFER
CONDITION : Minimum Level of Acceptance
If the obligation to make an open offer is attracted pursuant to an agreement
then
In case minimum acceptance is not received
Acquirer shall not acquire any shares under the open offer
&
The agreement attracting the obligation to make the open offer stand rescinded.
In case of CONDITIONAL OFFER
the Acquirer & PAC
shall not acquire any shares of the Target Co.
EXCEPT
Under the open offer & the underlying agreement

Reg. 20
COMPETING OFFER
Meaning of Competing Offer OFFER made by a person other than the acquirer who has made the
first Public announcement.
Who can ? Any Person
When ? Within 15 working days from the date of the Detailed Public Statement
(DPS) made by acquirer who has made the first PA.
Quantum ? Equal to the holding of Acquirer & PAC who has first made the PA,
Including the number of shares proposed to be acquired under the Share
Purchase agreement pursuant to which the open offer is made.
Any Condition ? Only if the acquirer has stipulated a minimum level of acceptance
Schedule of Activities Schedule of activities & the offer opening & closing of all competing offer
shall be carried out with identical timeliness.

Reg. 9 : MODE OF PAYMENT
ANY OF THE FOLLOWING – JOINTLY or SEPERATELY :-
 Cash
 Issue, exchange or transfer of listed shares in the equity share capital of the acquirer or
of any PAC
 Issue, exchange or transfer of listed secured debt instruments issued by the acquirer or
any person acting in concert with a rating not inferior to investment grade as rated by a
credit rating agency registered with the SEBI
 Issue, exchange or transfer of convertible debt securities entitling the holder thereof to
acquire listed shares in the equity share capital of the acquirer or of any PAC

 SHARE ACQUISITION in CASH
 in Previous 52 Weeks
 from the date of Public
Announcement
 By ACQUIRER / PAC
 Constituting >10 % of Voting Rights
in the Target Company
 Shareholders of Target Co.
 can demand the Consideration
 to be paid in CASH ONLY
 even if the Acquirer / PAC intends to
pay the offer price in exchange / by
issue of any other security

IN CASE OF UPWARD REVISION OF OFFER PRICE
THE CASH COMPONENT OF THE OFFER PRICE
MUST NOT BE REDUCED
Original
Offer
Price
Upward
Revision
1
Upward
Revision
2
Upward
Revision
3
Upward
Revision
4
Total 150 170 190 210 225
to be paid in
Equity Share of
₹10 each
50 70 80 90 110
CASH 100 100 110 120 115
ALLOWED YES YES
100 110
YES
110 120
NOT
ALLOWED

 Such shares are listed on a stock exchange and frequently traded at the time of the public
announcement
 Such shares have been listed for a period of at least 2 years preceding the date of the
public announcement
 Issuer of such class of shares has redressed at least 95% of the complaints received from
investors by the end of the calendar quarter immediately preceding the calendar month in
which the public announcement is made
 Issuer of such class of shares has been in material compliance (as per SEBI) with the
listing agreement for a period of at least 2 years immediately preceding the date of the
public announcement
 Impact of Auditors’ Qualifications (if any) on the audited accounts of the issuer of such
shares for 3 immediately preceding financial years does not exceed 5% of the net profit or
loss after tax of such issuer for the respective years
 SEBI has not issued any direction against the issuer of such shares not to access the
capital market or to issue fresh shares
CONVERSION OF OTHER SECURITIES
TOWARDS PAYMENT OF THE OFFER PRICE

VALUE OF SECURITIES FOR CONVERSION
 average of the weekly high and low of the closing prices of such securities quoted on the stock
exchange during the six months preceding the relevant date
 average of the weekly high and low of the closing prices of such securities quoted on the stock
exchange during the two weeks preceding the relevant date
 volume-weighted average market price for a period of sixty trading days preceding the date of the
public announcement, as traded on the stock exchange where the maximum volume of trading in
the shares of the company whose securities are being offered as consideration, are recorded
during the six-month period prior to relevant date
Exchange Ratio shall be duly certified by:
an Independent Merchant Banker (other than the manager to the open offer)
OR
an Independent Chartered Accountant having a minimum experience of 10 years
Higher of the following:–

Reg. 21 : Payment of Purchase Consideration
• AMOUNT OF PURCCHASE CONSIDERATION payable in
CASH
• transferred to SPECIAL ESCROW A/C
• with a banker to an Issue
• and deposit entire sum due & payable to shareholders as
consideration.
• The acquirer shall complete payment of consideration within
10 working days.
• At the end of 7 years: Unclaimed balance lying the credit of
Special Escrow Account must be transferred to IPEF
established under the SEBI (IPEF) Regulations, 2009.

Reg. 22 : Completion of Acquisition
• Acquirer not to complete Acquisition of Shares & Voting Rights in Target Company until the
expiry of offer period
• Preferential Allotment / Block deal / Bulk deal :
 Share to be kept in ESCROW ACCOUNT
 Acquirer shall have no control over them
 Transferred to acquirer upon complying with the Provision of Escrow
• Open Offer pursuant to Agreement:
 Complete the acquisition within 26 weeks
 Extension may be granted by SEBI in the interest of investors

Reg. 23 : Withdrawal of Offer
PERMITTED CONDITIONS:
• Statutory approvals required have been refused
• Acquirer being a natural person has died
• Any condition stipulated in the agreement for acquisition attracting the obligation to
make the open offer is not met for reasons beyond the control of the acquirer and such
agreement is rescinded.
― However such conditions were disclosed in the detailed public announcement & Letter of
offer.
• Any such circumstances as in the opinion SEBI merits withdrawal

SITUATION
Statutory approvals required have been refused
Acquirer being a natural person has died
Any condition stipulated in the agreement for
acquisition attracting the obligation to make
the open offer is not met for reasons beyond
the control of the acquirer and such
agreement is rescinded
Disclosed in the detailed public announcement
NOT disclosed in the detailed public
announcement
Preferential allotment is not successful

Within 2 working days
MERCHANT BANKER ( manager to open offer )
Make an announcement in Newspapers
Providing reasons & grounds for withdrawal of
offer
Simultaneously inform
SEBI
Stock Exchanges
Registered Office of the Target Company

In case of PREFERENTIAL ISSUE:
NO Withdrawal of offer if the open offer was made
pursuant to Preferential Allotment
even if the proposed acquisition via preferential allotment
is not successful.
The rationale for this amendment is that the day Board approves the preferential allotment, the market comes to know about the same and the share price
becomes volatile on account of the knowledge about the preferential allotment in spite of the fact that the shareholders have not approved the preferential
allotment. To plug this loophole resulting in volatility in share price, SEBI has changed the date for making a public announcement from date of passing of
shareholders resolution to date of passing of Board resolution

• Notwithstanding anything contained in these regulations,
• in the event the acquirer makes a public announcement of an open offer for
acquiring shares of a target company in terms of regulations 3, 4 or 5,
• he may delist the company in accordance with provisions of the Securities and
Exchange Board of India (Delisting of Equity Shares) Regulations, 2009
• Provided that the acquirer shall have declared upfront his intention to so
delist at the time of making the detailed public statement.
DELISTING OF SHARES

DELISTING OF SHARES
DUE TO :
i. Non receipt of prior approval of shareholders u/r 8
ii. Acquirer rejecting the discovered price u/r 16
iii. Non receipt of minimum number of equity shares u/r 17
of SEBI Delisting Regulations, 2009

DELISTING OF SHARES
ACQUIRER SHALL -
Give a Public Announcement within 2 working days in respect of such failure in all the
newspapers in which the detailed public statement was made
 Within 5 working days from the date of such Public Announcement, file with SEBI, a Draft
Letter of Offer
 Offer Price shall stand enhanced by an amount equal to a sum determined @ 10% p.a. for the
period between the scheduled date of payment till the actual date of payment of Purchase
Consideration
 Any Competing Offer shall not be entitled to delist the company
 No extra interest for the delay due to competing offer
 Shareholders who tendered their shares under this process shall be entitled to withdraw such
shares tendered, within 10 working days from the date of the public announcement

Reg.10
Automatic Exemption
Reg. 11
Exemption By SEBI
Relaxation from Procedural
requirements of Open Offer

Reg.10
Automatic Exemption

INTER SE TRANSFER amongst
 immediate relatives
 promoters (as per shareholding patters filed with Stx. In the last 3 years)
 PAC of Acquirer / Target Company
 a company, its subsidiaries, its holding company, other subsidiaries of
such holding company, persons holding not less than fifty per cent of the
equity shares of such company, other companies in which such persons
hold not less than fifty per cent of the equity shares, and their subsidiaries
subject to control over such qualifying persons being exclusively held by
the same persons

ACQUISITION IN THE ORDINARY COURSE OF BUSINESS BY
 Underwriter registered with SEBI
 Stock Broker registered with SEBI on behalf of client in exercise of lien over the shares
purchased on behalf of the client
 merchant banker registered with the Board or a nominated investor in the process of market
making
 any person acquiring shares pursuant to a scheme of safety net in terms of regulation 44 of
the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009
 a merchant banker registered with the Board acting as a stabilising agent
 a Scheduled Commercial Bank, acting as an escrow agent
 invocation of pledge by Scheduled Commercial Banks or Public Financial Institutions as a
pledgee

ACQUIRING SHARES PURSUANT
• to an AGREEMENT OF DISINVESTMENT
• U/S 18 OF SICA,1985
• to Reconstruction / Merger / Amalgamation / Demerger under order of Court NCLT
• to provisions of Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002
• to provisions of Delisting of shares
• to Acquisition by way of transmission, succession or inheritance
• acquisition of voting rights or preference shares carrying voting rights arising out of the
operation of Sec. 47(2) of Companies Act, 2013
• Conversion of debt into equity under Corporate Debt Restructuring Scheme
• Upon Share Forfeiture of Equity Shares by a Company

POST BUY BACK OF SHARES
If the shareholding increases and the trigger is touched,
then the Regulations exempt from the obligation to make an open offer
Provided such shareholder reduces his shareholding such that his voting rights fall to below the
threshold
within 90 days from the date of the closure of the said buy-back offer
Such shareholder should not have voted in favour of the resolution authorizing the buy-back of
securities

Mr. A already
holds 24% shares
of PQR Ltd.
Mr. Z promoter of Zoo Ltd.
holds 66% shares of Zoo
Ltd. since incorporation
PQR Ltd. ZOO Ltd.
16% Shares of PQR Ltd.
26% Shares of ZOO Ltd.
Mr. A made a
DPS &
acquired
further 18%
shares of PQR
Ltd.
Is Mr. A required to give PA for the open offer for
the acquisition of 26% shares of ZOO Ltd. ?

Mr. A already
holds 24% shares
of PQR Ltd.
PQR Ltd. ZOO Ltd.
19% Shares of PQR
Ltd.
Mr. A made a
DPS &
acquired
further 18%
shares of PQR
Ltd.
Is Mr. A required to give PA for the open offer for
the acquisition of 26% shares of ZOO Ltd. ?

Mr. A already
holds 24% shares
of PQR Ltd.
PQR Ltd. ZOO Ltd.
16% Shares of PQR Ltd.
Mr. A made a
DPS &
acquired
further 18%
shares of PQR
Ltd.
Is Mr. Z required to give PA for the open offer for
the acquisition of 16% shares of PQR Ltd. , if he
was previously holding 14% shares of PQR Ltd.
?

• VCF
• SFC & its subsidiaries
• AIF
• Foreign VCF
PROMOTERS

Reg. 11
Exemption By SEBI

Can the acquisitions, resulting from any
agreement attracting the obligation to make an
open offer, be completed by way of transactions
settled on Stock exchange such as bulk/block
deals?
No. Since the same would result in completion of the triggering acquisition
before the expiry of the offer period and would be against the provisions of
regulation 22(1).

TAKEOVER DEFENSE STRATEGIES
PACKMAN
DEFENCE
CROWN
JEWEL
BUYBACK GOLDEN
PARACHUTES
SHARK
REPELLANTS
WHITE
KNIGHT
GREEN MAIL POISON
PILLS

PACKMAN DEFENCE
 The Target firm then tries to acquire the company
that has made the hostile takeover attempt.
 The Pac-Man defence is an expensive strategy
that may increase debts for the target company.
Shareholders may suffer losses or lower dividends
in future years.
 Possible only when the company is cash rich and
the acquiring company’s share prices are available
at cheaper rate
 The Pac-Man defence may be used alone or in
conjunction with other takeover defences, such as
the white knight.

CROWN JEWEL DEFENCE
The target company spins off its major attractive
assets to new company specially formed for this
purpose.
This makes the target company less attractive for
the hostile acquirer.
Crown jewel defence is a useful tactic to avoid
hostile takeover especially for those companies
where its assets backing is major strength.
This defence is not practical in India because of
Reg. 26(2)(a) of Takeover Regulations, which
restricts the BODs of Target Company & any of its
subsidiary from alienating any material assets
outside the ordinary course of business without the
approval of shareholders of the Company by
Special resolution.

GREEN MAIL
Promoters of the Target Company make an
offer at an attractive price to the acquirer, to
surrender his holding in Target Company
back to the promoters of the Target
company.
This tactic shall be used only after a cost-
benefit analysis.
Abhishek Dalmia vs GESCO
Arun Bajoria vs Bombay Dyeing

WHITE KNIGHT
White Knight is the person who helps
promoters of the Target company in making
the counter bid within 15 working days
against the acquirer. As a result, promoters
of the Target company are able to get rid of
the acquirer.
White Knight and Promoters of the Target
Company jointly give the counter bid to
acquire the shares of the Target Company at
a price higher than the price offered by
acquirer.

OTHER TAKEOVER DEFENCE
• BANK MAIL
• FLIP OVER
• GRAY KNIGHT
• SUCIDE PILL
• KILLER BEAS
• JONESTOWN DEFENCE
• LOCK UP PROVISION
• PEOPLE PILL
• LEVERAGED RECAPITALIZATION
• NANCY REGAN DEFENCE
• NON VOTING STOCK
• LOLLIPOP DEFENCE
• MACRONI DEFENCE
• LOBSTER TRAP
• POISON PUT
• SAFE HARBOUR
• SCORCHED EARTH DEFENCE
• SHOW STOPPERS
• STAGGERED BOD
• STANDSTILL AGREEMENT
• TOP UPS
• WHITE SQUIRE
• WHITE MAIL
• VOTING PLAN RIGHT

CS ANAND KANKANI
Practicing Company Secretary
& Academician

SEBI TAKEOVER REGULATIONS 2011

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SEBI TAKEOVER REGULATIONS 2011