SEBI raises takeover trigger and open offer limit, scraps non-compete fees

The Securities and Exchange Board of India (SEBI) has raised the trigger point for corporate buyouts to 25 per cent from the current 15 per cent. The SEBI board also raised the open offer requirement for takeovers to 26 per cent from the existing 20 per cent.

Under the new rules, investors who acquire more than 25 per cent stake in a company will have to make a public offer for another 26 per cent, SEBI chairman UK Sinha said.

Against this, the takeover trigger for an open offer is 33.3 per cent in Japan, while it is 30 per cent in Hong Kong and 29.99 per cent in Singapore. The trigger requires the investor to make an offer for the entire remaining equity of the target company.

The market regulator also decided to do away with the non-compete fees, which is paid to selling promoters so that they do not re-enter the business and pose a threat to the acquired company.

SEBI, however, opted to steer clear of the Achuthan panel's recommendation to raise the open offer limit to 100 per cent.

Indian promoters have also opposed the 100 per cent open offer limit, which would have increased the cost of acquisition for them and given foreign firms an advantage in participating in mergers and acquisitions in India.