Mumbai: The stock market regulator Securities and Exchange Board of India, or Sebi, on Friday notified the new takeover code. The code, under which any entity buying more than 25% stake in a listed company will have to make an open offer to buy an additional 26% from the public, will take effect after a month.
Going by the existing takeover rules, if an entity buys more than 15% stake in a company, it needs to make an open offer to buy at least another 20% to give existing shareholders an exit route.
In its July meeting, Sebi’s board had approved the recommendations of the takeover committee with some changes.
A committee appointed by the market regulator last year recommended that on crossing the trigger limit of 25%, an offer be made to buy up to 100%.
Under the new takeover code, the minimum price payable to shareholders of the target company will be highest of the following four -- the negotiated price that triggered the open offer; the volume-weighted average price paid by the acquirer in the preceding 52 weeks; the highest price paid by the acquirer during the preceding 26 weeks; and the market price based on the volume-weighted average market prices in the preceding 60 trading days.
Currently, open offers are priced between the weekly averages of market price for 26 weeks or two weeks, whichever is higher.
The new takeover code does not provide for a non-compete fees to be paid to the promoters, making all shareholders equal beneficiaries.
Under current regulations, selling promoters are eligible for a non-compete fee, as a compensation for not re-entering the business. The takeover panel had recommended against the non-compete fee.