SEBI may make 100 per cent open offer mandatory in M&As: report

In a move that will make corporate takeovers tougher, the Securities and Exchange Board of India (SEBI) is considering a proposal to make open offer for 100 per cent stake mandatory for acquirers in any listed company, according to a report.

Under current regulations, an open offer for a minimum of 20 per cent in the target company is required to be made by any entity that has purchased 15 per cent equity, either from the promoters or in the open market.

SEBI has set up a takeover regulatory advisory committee, with former Securities Appellate Tribunal (SAT) presiding officer C Achuthan as chairman, to look into changes in the existing takeover regulations.

While any changes are expected to take effect only from the next fiscal, the committee is said to be seriously looking at increasing the open offer size from 20 per cent to as high as 100 per cent, while it might also increase the open offer trigger limit from 15 per cent, press reports said, quoting unnamed sources.

While an increase in open offer size could mean larger cash outgo for the acquirers, the step is being considered in the larger interest of retail and other public shareholders, the report adds.

The acquisition of shares and control of a company are currently governed by the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, commonly known as the Takeover Code.

Under this, all public shareholders do not necessarily get an exit option even if the ownership of a company changes hands, as the open offer size need not be more than 20 per cent.

Globally, many countries such as the UK, Hong Kong and Singapore have a higher open offer trigger limit. This is mainly in the interest of shareholders who may not want to be part of the new entity.