SEBI panel suggests open offer trigger of 25 per cent for takeovers

A committee appointed by stock market regulator Securities and Exchange Board of India (SEBI) has suggested an increase in the open offer threshold in corporate takeovers at 25 per cent against the current 15 per cent.

The committee headed by C Achutan, former presiding officer of the Securities Appellate Tribunal, has, among others, recommended that the open offer be set at 75 per cent post acquisition of 25 per cent stake in a body corporate.

The 25 per cent threshold will bring takeover rules in India closer to open offer trigger limits in several other countries.

The open offer threshold is 30 per cent in Singapore and the UK, 33 per cent in Malaysia and 35 per cent in Hong Kong.

The committee suggested that the takeover valuation should be based on the 52-week average price of the company that is being taken over.
 
The committee also suggested equal treatment of all shareholders and a non-compete fee of 25 per cent of the deal size to the seller, in cases where the promoters get more than the other shareholders.

It also suggested allowing investors to own up to a fourth of a company without an obligation to buy more from minority shareholders.

The SEBI regulations on takeover of companies, introduced in 1997, were reviewed in 2002 and the incorporation of the current recommendations would require a fresh amendment to the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2010.

The revised rules are expected to solve most of the litigations and investor complaints stemming from the current regulations.