The Jet-Etihad deal may require an open offer, market regulator Securities and Exchange Board of India (SEBI) has indicated.
Without naming any specific deal or company, SEBI chief U. K. Sinha said: “Even if the acquirer has got less than threshold (to trigger a mandatory open offer) but has got control over the company, then he has to make an open offer. So, SEBI will be looking into the matter in any case where there is suspicion or belief that control has been acquired, it will apply its own tests, and take a decision.”
Etihad has proposed buying 24 per cent equity in Jet. Although this is less than the 25 per cent limit for a mandatory open offer to minority shareholders, it is perceived that control will be with the Abu Dhabi-based airline.
The Foreign Investment Promotion Board, an inter-ministerial body to clear FDI proposal, had deferred the proposal on the issue of effective control.
On differences over the definition of effective control in the Takeover Code, Sinha said there was no room for controversy on the matter. SEBI’s position was very clear and he was not talking about any specific deal. An open offer is a mechanism to provide safety to other investors, he stressed.
According to SEBI’s takeover regulations, any entity acquiring 25 per cent or more stake in a listed company must mandatorily make an open offer to buy an additional 26 per cent shares from public shareholders.
However, the open offer obligations also apply to the entities acquiring ‘control’ of a listed company with a stake less than this threshold limit of 25 per cent.