In a bid to make it easier for takeover of listed entities, SEBI proposes to put in place a new framework on the process and pricing of an open offer and delisting of shares.

The market regulator is doing this because there is an overlap of several regulations. For example, when an entity acquires over 26 per cent of a listed company, a mandatory open offer is triggered. The new owner could end up acquiring as much as 90 per cent if such an open offer is successful. Alongside, there is the requirement of minimum 25 per cent public shareholding. So, the acquirer has to sell shares to bring its holding below 75 per cent. This gets further complicated if the new owner plans to delist the shares.

A SEBI discussion paper issued on Friday on this says: “The consecutive flow of public transactions would also confuse investors in the secondary market who need not be shareholders in the listed company — an offer to buy their shares (open offer under the Takeover Regulations), followed by an offer to sell shares to them (to comply with the Securities Contracts Regulation Rules), and then an offer to buy their shares ( under the Delisting Regulations).”

The paper is based on the recommendations of a sub-group of SEBI’s primary market advisory committee.

Under the new framework, the acquirer must state in the first public announcement, triggered by the mandatory tender offer, whether delisting is intended. “If the acquirer is desirous of delisting, a differential pricing must be proposed — an open offer price no lower than the takeover price and a higher price with a suitable premium reflecting what the acquirer is willing to pay if delisting were successful,” the sub-group’s report suggested.

If the delisting bid goes through, the acquirer will have to pay the delisting price to all the shareholders. If it fails, all the shareholders will be paid the open offer price. The panel also wants to give a majority of the minority shareholders the power to reject a delisting bid.

“If these approvals are not received, the delisting element of the open offer would stand rendered void and the open offer would continue with the takeover price,” says the SEBI paper.

The new framework also proposes allowing the acquirer to take more than one shot at delisting. This will be allowed without the acquirer having to bring down its stake to below 75 per cent for a period of 18 months.

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