Sebi on Tuesday made amendments to the Takeover Code, making open offer obligations applicable in case of ADR and GDR holders with voting rights.
Thus, ADR and GDR holders with voting rights, who have crossed the takeover threshold limits, will have to make an open offer to shareholders of the company for a further 20% stake.
This significantly complicates matters relating to the Bharti-MTN deal, and makes it more expensive for the South Africa-based MTN Group to consummate the deal requiring it to make an open offer to Bharti shareholders, which will cost it around $6.8billion as per Bharti Airtel’s closing share price on Tuesday.
It may be noted that Bharti had sought an informal guidance from Sebi in July about whether or not MTN would have to make an open offer, in case the deal goes through in the proposed form.
The regulator had at the time said that as long as MTN did not convert its GDRs into Indian shares, it would not be required to make an open offer. Thus, this step comes as a bolt from the blue for Bharti.
Bharti has said that the deal will be in compliance with all rules and regulations, when it is finally signed. The telco is likely to ask for an exemption from an open offer for MTN in this case.
We maintain an ACCUMULATE on the stock, with a target price of Rs457.