SEBI board meet tomorrow: M&A regulations, delist norms on agenda

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Investors will keenly watch the developments in the SEBI board meeting on Tuesday as it is likely to announce several investor-friendly decisions.

Proposal

According to reports, the board of the Securities and Exchange Board of India (SEBI) could approve easier merger and Acquisition (M&A) norms and a rehaul of the superior voting rights of new-age technology company promoters. It is also likely to approve the setting up of social stock exchanges and gold exchanges. The SEBI board is also likely to discuss plans for making it easier for companies to delist after an open offer by allowing the acquirer to launch both processes simultaneously.

Takeover norms

According to a report in The Economic Times, the Takeover Regulations Advisory Committee, headed by C Achuthan, had recommended in 2010 that delisting be allowed following an open offer, but the board hadn’t accepted the suggestion.

Under the extant rules, if the acquirer’s holding goes up to 90% following an open offer and the acquirer has to reduce the holding below 75% within a year. Whereas the delisting rules require the buyer to reach 90% to make the company private. Thus making the acquisition of listed companies process

What it means

The market regulator had proposed that the intention to delist should be disclosed by the acquirer upfront in either type of acquisition, direct and indirect. The market regulator had proposed that differential pricing must be proposed by the acquirer if they want to delist.

An open offer price which should not be lower than the minimum takeover price and a higher price with a suitable premium, reflecting what the acquirer is willing to pay if the delisting is successful. According to that proposal, if the delisting offer goes through, the acquirer would have to pay the delisting price to all the shareholders. If the delisting fails, then the acquirer will have to pay all the shareholders the open offer price.

The paper quoted Ravishu Shah, managing director and co-head valuation, RBSA Advisors, as saying, “The proposed revision in the framework will benefit the acquirer by streamlining the regulatory process for delisting pursuant to open offer and reduction in the overall timelines and uncertainties involved in the process.”