SEBI Board Approves Amendments To Facilitate Post-Takeover Delisting

In an effort to facilitate the delisting of a company after an acquisition, the Securities and Exchange Board of India approved key regulatory changes in its board meeting on Sept. 28. These are among a slew of other important amendments the regulator approved.

Current regulations require an acquirer that exceeds 75% threshold of public shareholding, pursuant to an open offer mandated by Takeover Regulations, to first meet the required minimum public shareholding threshold and then make a delisting offer.

The SEBI board has decided to amend existing regulations to allow acquirers an easier route to delist or reduce stake below 75% within two years.

Here's how it will work for acquirers making an open offer under the Takeover Regulations:

• If the acquirer wants to delist the target company it must propose a higher price—a premium over the open offer price.

• If the response to the open offer takes acquirer's shareholding in target to delisting threshold of 90%, all shareholders who tender their shares in the offer will be paid the delisting price.

• If the 90% threshold is not met via the response to the open offer then all shareholders who tender their shares shall be paid the same takeover price.

• If the target company does not get delisted but acquirer crosses 75% threshold, the acquirer will have 12-month period to attempt delisting under reverse book building method. If the delisting does not occur in that one year, the acquirer will have another 12 months to meet the minimum public shareholding norm.

• If at the time of the acquisition the acquirer states the target will remain listed, but crosses 75% threshold after open offer, then the acquirer can proportionately scale down its purchases made via takeover deal and open offer such that 75% is not crossed. Or the acquirer can comply with the minimum public shareholding norm within the time stipulated under the Securities Contract Regulations.