Sebi makes accommodation for delay in open offers due to disputes
- Sebi suggests 10% interest should be added to the open offer price if the offer is delayed due to disputes
- Sebi acknowledges that the takeover code is silent in addressing delays in disputes in judicial forums
In the wake of Fortis Healthcare Ltd's pending open offer the market regulator proposed changes in its takeover code. Under the proposed norms, Securities and Exchange Board of India (Sebi) suggested that a 10% interest should be added to the open offer price if the offer is delayed due to disputes such as ones relating to valuation, related parties, investor complaints, delay in payments by the acquirer among others.
In discussion paper issued on Monday, the regulator acknowledged that the code had provisions related to delay in regulatory approvals but was silent in addressing delays when it came to other disputes in other judicial forums.
Currently, the acquirer in some cases chooses to compensate the shareholders for delay in open offer but it is not required to do so under the regulations.
In January this year the market regulator had urged the Supreme Court to allow Malaysian healthcare provider IHH Healthcare to complete its open offer for Fortis. Supreme Court had ordered a freeze on the transaction in December 2018 despite the two entities completing the transaction with all regulatory approvals. The apex court's decision was following a complaint by investors Daiichi Sankyo.
The regulator also proposed to allow completion of open offer acquisition of shares through stock exchange settlement for all types of transactions, including bulk deals and block deals. By which the acquirer will be able to directly acquire significant stake in the target company through stock exchanges instead of negotiating through the off-market route.
In case of indirect acquisitions, 100% of the open offer amount must be deposited two days before the announcement in escrow account.
The regulator said that since the acquiring is getting indirect control of the target company by virtue of completing the primary acquisition and enjoys the benefits arising out of being in control over the target company the deposit it to ensure entities performance of obligations.
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