substantial acquisition of shares and take overs (india)
TRANSCRIPT
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SUBSTANTIAL ACQUISITION OF
SHARES AND TAKEOVERS
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Evolution Regulation and applicability Objectives of the Take over code What is a Takeover? Reasons for a Takeover Types of Takeover Substantial Acquisition Applicability of Laws Important Definitions Acquirer Acquisition Control Target Company
FLOW OF THE PRESENTATION
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Promoter Promoter Group Person Acting In Concert Convertible security, disinvestment & manager to the open offer Shares Open Offer, Conditional Offer and Voluntary offer Minimum Offer Size Offer Size (Regulation 7) Public Announcement Process of public Announcement Timings of Public Announcement Contents of Public Announcement
FLOW OF THE PPTFLOW OF THE PPTFLOW OF THE PPTFLOW OF THE PRESENTATION
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Letter of offer Offer Period Offer Price Minimum Offer Price for Frequently Traded Shares Minimum Offer Price For Infrequently Traded Shares Enterprise Value Comparison of SEBI track report 1997 and SEBI regulations 2011 Letter Of Offer Trigger Points for open offer Acquistion of Shares (Regulation 3) Initial Trigger point Creeping Acquisition Acquisition of control
FLOW OF THE PRESENTATION
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Indirect acquisition of shares and controlVoluntary OfferNon Competent FeesMode Of PaymentEscrow AccountPayments of considerationDisclosures under Chap 5ExemptionsTakeover Panel Investigation And Action By The BoardCompeting Offer
FLOW OF THE PRESENTATION
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Size of Competing offerTiming under competing offerWithdrawal of An Open OfferOpen offer ProcessObligation of acquirerObligation of the target companyObligation of the merchant BankerPenalties for non-complianceCase study – United Spirits and Diageo
FLOW OF THE PRESENTATION
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Concept of merger and acquisition in India was not popular until the year 1988.
Very small percentage of businesses in the country used to come together, mostly
into a friendly acquisition with a negotiated deal.
Key factor - Regulatory and prohibitory provisions of MRTP Act, 1969.
Follow a pressurized and burdensome procedure to get approval for merger and
acquisitions.
Globalisation - Opened the Doors Of Indian Economy To International Investors.
Created a need for some regulation to protect the interest of investors.
EVOLUTION
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SEBI sets up a committee under former Chief Justice of India P N Bhagwati to
review the 1994 Takeover Regulations in order to frame comprehensive regulations.
Accepts the report and Substantial Acquisition of Shares and Takeovers Regulations,
1997 notified.
Volume is tremendously increasing with an estimated deals worth more than $100
billions in 2007.
Recommendations of The Takeover Regulations Advisory Committee (TRAC) were
accepted.
Amendments were made and brought in 2011 and were taken as the new guideline
code.
India has emerged as one of the top countries entering into merger and acquisitions.
EVOLUTION
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Regulations may be called the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
5th May, 2015 - SEBI (Substantial Acquisition of Shares and Takeovers)
(Second Amendment) Regulations, 2015.
These regulations shall apply to direct and indirect acquisition of
shares or voting rights in, or control over target company.
REGULATION & APPLICABILITY
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To provide a transparent legal framework for facilitating takeover activities.
To protect the interests of investors in securities and the securities market.
To balance the conflicting objectives and interests of various stakeholders.
To provide each shareholder an opportunity to exit his investment in the target
company.
To provide acquirers with a transparent legal framework to acquire and to make
an open offer.
To ensure that fair and accurate disclosure of all material information is made.
To regulate and provide for fair and effective competition among acquirers
desirous of taking over the same target company.
OBJECTIVES - TAKEOVER CODE
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A transaction or a series of transactions whereby a person acquires control over
the assets of a company, either directly by becoming the owner of those assets or
indirectly by acquiring control of the management of the company. A takeover is
the purchase of one company (the target) by another (the acquirer, or bidder).
1) In October, 2006 – Tata Steel acquired Corus for $12.8 billions.
2) 21st January, 2015 - Mahindra completes 51% takeover in Peugeot Motocycles.
TAKEOVER
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Where shares are closely held (i.e. by a small no. of persons), a take-over will
generally be effected by agreement with the holders of the majority of the share
capital of the company being acquired.
Where shares are held by the public generally, the take-over may be effected by:-
1) By agreement between the acquirer and the controllers of the acquired
company;
2) By purchase of shares on the Stock Exchange;
3) By means of a “take - over bid.”
TAKEOVER
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AcquirerTarget
CompanyControl
Takeover
AcquirerTarget
Company
Substantial Quantity Of Shares
And Voting Rights
Substantial Acquisition Of Shares
When an “acquirer” takes over the control of the “target company”, it is termed as
“Takeover”.
When an acquirer acquires “substantial quantity of shares or voting rights” of the
Target Company, it results into “Substantial acquisition of shares”.
TAKEOVER
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REASONS FOR TAKEOVER SYNERGY - By combining business activities, performance will increase
and costs will decrease.
DIVERSIFICATION - A company that merges to diversify may acquire
another company in a seemingly unrelated industry in order to reduce the
impact of a particular industry's performance on its profitability.
GROWTH - Mergers can give the acquiring company an opportunity to grow
market share without having to really earn it by doing the work themselves.
INCREASE SUPPLY - Chain Pricing Power - By buying out one of its
suppliers or one of the distributors, a business can eliminate a level of costs.
ELIMINATE COMPETITION - Many deals allow the acquirer to eliminate
future competition and gain a larger market share in its product's market.
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TAKEOVERLEGAL
CONTEXT
BUSINESS
CONTEXT
TYPES OF TAKEOVER
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LEGAL CONTEXTFRIENDLY OR
NEGOTIATED
HOSTILE
BAIL OUT
LEGAL CONTEXT
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LEGAL CONTEXTFRIENDLY
OR NEGOTIA
TED
HOSTILE BAIL OUT
Friendly takeover means takeover of one company by change in its management & control
through negotiations between the existing promoters and prospective investor in a friendly
manner. Thus it is also called Negotiated Takeover. This kind of takeover is resorted to further
some common objectives of both the parties. It is an acquisition which is approved by the
management. Before the bidder makes an offer for another company, it actually first informs the
company’s Board of Directors.
E.g. - Johnson & Johnson completed the friendly takeover of a Dutch vaccine maker Crucell for
about $2.37 billion.
NEGOTIATED TAKEOVER
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Hostile takeover is a takeover where one company unilaterally pursues the
acquisition of shares of another company without being into the knowledge of that
other company. The most dominant purpose which has forced most of the companies
to resort to this kind of takeover is increase in market share. The company being
acquired does not approve of the buyout and fights against the acquisition.
E.g. In 2000, AOL took over the much larger and successful Time Warner.
HOSTILE TAKEOVER
LEGAL CONTEXT
FRIENDLY OR NEGOTIATED HOSTILE BAIL OUT
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It is the process of rehabilitation of a financially weak company not being a sick
industrial company. The lead institution shall appraise the financially weak company
taking into account the financial viability, and assess the requirement of funds for
revival and draw up the rehabilitation package on the principle of protection of interests
of minority shareholders, good management, effective revival and transparency.
E.g. Tech Mahindra Ltd. acquired Satyam Ltd.
BAILOUT
LEGAL CONTEXT
FRIENDLY OR NEGOTIATED HOSTILE BAIL OUT
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BUSINESS CONTEXT
HORIZONTAL
VERTICAL
CONGLOMERATE
BUSINESS CONTEXT
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BUSINESS CONTEXT
HORIZONTAL
VERTICAL
CONGLOMERATE
Takeover of one company by another company in the same industry. The main
purpose behind this kind of takeover is achieving the economies of scale, increasing
the market share and economies of scope.
E.g. 1) Bank of Madura with ICICI Bank Ltd. (Industrial Credit and Investment
Corporation of India) 2) Patni Computers by iGate.
HORIZONTAL TAKEOVER
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Takeover by one company of its suppliers or customers. The former is known as
Backward integration and latter is known as Forward integration. A vertical merger
occurs when two or more firms, operating at different levels within an industry's supply
chain, merge operations. Most often the logic behind the merger is to increase synergies
created by merging firms that would be more efficient operating as one. E.g. 1)
Takeover of Sona Steerings Ltd. By Maruti Udyog Ltd. 2) Tata Motors acquired Trilix
Srl for €1.85 million to enhance its styling and design capabilities to global standards.
VERTICAL TAKEOVERBUSINESS CONTEXT
HORIZONTAL VERTICAL CONGLOMERATE
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Takeover of one company by another company operating in totally different industries
or firms operating in different geographic areas. It could include extending corporate
territories and extending a product range. The main purpose of this kind of takeover is
diversification. Pure conglomerate mergers involve firms with nothing in common,
while mixed conglomerate mergers involve firms that are looking for product
extensions or market extensions.
E.g. Walt Disney Company and the American Broadcasting Company.
CONGLOMERATE TAKEOVERBUSINESS CONTEXT
HORIZONTAL VERTICAL CONGLOMERATE
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Acquisition, directly or indirectly, by an acquirer or jointly with
Persons Acting In Concert with him of 25% or more of the
shares or voting rights of a listed company.
Acquisition, directly or indirectly, by an acquirer or jointly with
Persons Acting In Concert with him, who already hold 25 % or
more but less than 75% of shares, a further 5% of shares or
voting rights in any financial year.
SUBSTANTIAL ACQUISITION
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TAKEOVERLISTED COMPANY
SEBI (SAST)
COMPANIES ACT, 2013
FEMA ACT, 1999
SCRA, 1956
OTHER GOV. ACTS
UNLISTED COMPANYCOMPANIES ACT, 2013
APPLICABILITY OF LAWS
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KEYTERMS AND DEFINITIONS
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An acquirer means any individual / company / any other legal entity which
intends to acquire or acquires substantial quantity of shares or voting rights of
target company or acquires or agrees to acquire control over the target company.
It includes persons acting in concert (PAC) with the acquirer.
E.g. – Reliance Industries Ltd. was the Acquirer in the Network 18 Media and
Investments deal. In May 2014, it acquired 78% stake for Rs. 4,000 Crores.
ACQUIRERACQUIRER
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“Acquisition” means, directly or indirectly, acquiring or agreeing to acquire
shares or voting rights in, or control over, a target company.
E.g. Flipkart acquired Myntra in May, 2014 for around Rs. 2,000 Crores.
Directly Indirectly
Acquiring Agreeing to Acquire
OR
OR
Voting Rights ControlOROR
Target Company
Shares
Means
ACQUISITION
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Control includes the right to appoint directly or indirectly or by virtue of agreements
or in any other manner majority of directors on the Board of the target company or
to control management or policy decisions affecting the target company.
CONTROL
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A Target Company means a company and includes a body corporate or corporation
established under a Central legislation, State legislation or Provincial legislation for
the time being in force, whose shares are listed on a stock exchange.
E.g. Essar oil is a Target company for Rosneft.
TARGET COMPANY
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The person or persons who are in control of the issuer.
The person or persons who are instrumental in the formulation of a plan or
programme pursuant to which specified securities are offered to public.
The person or persons named in the offer document as promoters.
Provided that a director or officer of the issuer or a person, if acting as such
merely in his professional capacity, shall not be deemed as a promoter.
PROMOTER
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PROMOTERS OF HDFC BANK
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i) The promoter
(ii) An immediate relative of the promoter (i.e., any spouse of that person, or any
parent, brother, sister or child of the person or of the spouse); and
(iii) In case the promoter is a body corporate:
a) a subsidiary or holding company of such body corporate;
b) any body corporate in which the promoter holds ten per cent. or more of the
equity share capital or which holds ten per cent. or more of the equity share capital
of the promoter;
c) any body corporate in which a group of individuals or companies or combinations
thereof which hold twenty per cent. or more of the equity share capital in that body
corporate also holds twenty per cent. or more of the equity share capital of the
issuer;
PROMOTER GROUP
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(iv) in case the promoter is an individual:
a) any body corporate in which ten per cent. or more of the equity share capital is
held by the promoter or an immediate relative of the promoter or a firm or Hindu
Undivided Family in which the promoter or any one or more of his immediate
relative is a member;
b) any body corporate in which a body corporate as provided in (A) above holds ten
per cent. or more, of the equity share capital;
c) any Hindu Undivided Family or firm in which the aggregate shareholding of the
promoter and his immediate relatives is equal to or more than ten percent of the total;
(v) all persons whose shareholding is aggregated for the purpose of disclosing in the
prospectus under the heading "shareholding of the promoter group”.
PROMOTER GROUP
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PERSONS ACTING IN CONCERT
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PERSONS DEEMED TO BE ACTING IN CONCERT.1) A Company, its Holding or Subsidiary or Company under the same Management or control.
2) A Company, its directors and any person entrusted with the management of the company.3) Directors of companies (1st & 2nd point) and associates of such directors.
4) Promoters and members of the Promoter group.
5) Immediate relatives.
6) Mutual Fund, its Sponsor, Trustees, Trustee Company and AMC.
7) Collective Investment Scheme and its Collective Investment Management Company, Trustees and Trustee Company.8) Venture Capital Funds with Sponsor, Trustees, Trustee Company and AMC.
9) Foreign Institutional Investor and its sub-accounts.
10) Merchant banker and its client, who is an acquirer.
11) Portfolio manager and its client, who is an acquirer.
12) Banks, Financial Advisors and Stock brokers of the acquirer.
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CONVERTIBLE SECURITY means a security which is convertible into or exchangeable with
equity shares of the issuer at a later date, with or without the option of the holder of the security, and
includes convertible debt instruments and convertible preference shares.
E.g. The Indian Hotels Company Ltd. issued Unsecured Compulsory Convertible Debentures.
DISINVESTMENT means the direct or indirect sale by the Central Government or any State
Government or by a government company, as the case may be, of shares or voting rights in, or
control over, a target company, which is a public sector undertaking. For 2015-16, the budgeted
disinvestment target is Rs.69,500 crore, of which Rs.41,000 crore is expected from stake sale in state
- owned companies, and Rs.28,500 crore from sale of loss-making public sector units.
E.g. Indian Government raised around Rs.9,300 crores by selling a 10% stake sale in Indian Oil.
MANAGER TO THE OPEN OFFER means Any person who is engaged in the business of issue
management either by making arrangements regarding selling, buying or subscribing to securities or
acting as a manager, consultant, adviser or rendering corporate advisory service in relation to such
issue management. E.g. JM Financial in the Reliance Infrastructure open offer for Pipavav Defence.
CONVERTIBLE SECURITY, DISINVESTMENT & MANAGER TO THE OPEN OFFER
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SHARES means shares in the equity share capital of a target company carrying
voting rights, and includes any security which entitles the holder thereof to
exercise voting rights. For the purpose of this clause shares will include all
depository receipts carrying an entitlement to exercise voting rights in the target
company
FREQUENTLY TRADED AND INFREQUENTLY TRADED SHARES
Means shares of a target company, in which the traded turnover on any stock
exchange during the 12 calendar months preceding the calendar month in which
the public announcement is made, is at least 10% of the total number of shares of
the target company. If the turnover is less than 10%, it will be deemed to be
infrequently traded.
SHARES
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OPEN OFFER - An invitation to shareholders of a Target company to sell their
shares to the acquirer at a specified price before closure of the offer period.
CONDITIONAL OFFER - An open offer to shareholders where acquirer keeps
a condition that he will accept shares only if response is beyond a certain limit.
VOLUNTARY OFFER - An acquirer, who together with persons acting in
concert with him, holds shares or voting rights in a target company entitling them
to exercise twenty-five per cent or more but less than the maximum permissible
non-public shareholding, shall be entitled to voluntarily make a public
announcement of an open offer for acquiring shares in accordance with these
regulations, subject to their aggregate shareholding after completion of the open
offer not exceeding the maximum permissible non-public shareholding.
OFFERS
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OFFER SIZE REGULATION (7)
SEBI TAKEOVER REGULATIONS, 1997
20%
SEBI TAKEOVERREGULATIONS, 2011
26%
Global Trend
Indonesia 100%
France 100%
Hong Kong 100%
UK No % prescribed
Singapore 100%
Japan 100%
India 26%
Acquirer getting simple majority i.e. 51% (25% + 26%) No need to depend on other shareholders for passing simple corporate law
resolutions.
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PUBLIC ANNOUNCEMENT (PA)
A public announcement is an announcement made in the newspapers by the
acquirer primarily disclosing his intention to acquire shares of the target
company from existing shareholders by means of an open offer.
OBJECTIVE OF PUBLIC ANNOUNCEMENT
The Public Announcement is made to ensure that the shareholders of the
target company are aware of an exit opportunity available to them through
ensuing open offer.
PUBLIC ANNOUNCEMENT
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PROCESS OF PA
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TIMMINGS OF PA
The Public Announcement shall be sent to-
the stock exchanges on which the shares of the target company are listed.
The Board and to the target company at its registered office within one
working day of the date of the public announcement.
In terms of Regulation 13(4) of SEBI (SAST) Regulations, 2011, a
Detailed Public Statement(DPS) shall be published by the acquirer
in newspaper and one copy to be submitted to SEBI through the
Manager to the Open Offer within 5 working days from the date
of Public Announcement.
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CONTENTS OF PUBLIC ANNOUNCEMENT
The public announcement shall contain such information as may be specified,
including the following —
Name and identity of the acquirer and Persons Acting In Concert with him,
Name and identity of the sellers, if any,
Nature of the proposed acquisition such as purchase of shares or allotment of
shares, or any other means of acquisition of shares or voting rights in, or control
over the target company ,
The consideration for the proposed acquisition that attracted the obligation to make
an open offer for acquiring shares, and the price per share, if any;
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The offer price, and mode of payment of consideration; and
Offer size, and conditions as to minimum level of acceptances, if any.
The detailed public statement to the public announcement shall contain such
information as may be specified in order to enable shareholders to make an informed
decision with reference to the open offer.
The public announcement of the open offer, the detailed public statement, and any other
statement, advertisement, circular, brochure, publicity material.
Letter of offer issued in relation to the acquisition of shares under these regulations
shall not omit any relevant information, or contain any misleading information.
CONTENTS OF PUBLIC ANNOUNCEMENT
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LETTER OF OFFER(LOF)
A document addressed to the shareholders of the target company containing
disclosures (acquirer/PACs, target company, their financials, offer price,
number of shares to be acquired, purpose of acquisition, future plans of
acquirer, the procedure to be followed by acquirer in accepting the shares
tendered by the shareholders and the period within which all the formalities
to the offer would be completed)
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LETTER OF OFFEROFFER SIZE FEE (Rs.)
Less than or equal to one crore rupees Rs. 1,00,000/-
More than one crore rupees, but less than or equal to five crore rupees
Rs. 2,00,000/-
More than five crore rupees, but less than or equal to ten crore rupees
Rs. 3,00,000/-
More than ten crore rupees, but less than or equal to one thousand crore rupees.
0.5% of the offer size
More than one thousand crore rupees, but less than or equal to five thousand crore rupees
Rs. 5,00,00,000/- plus 0.125% of the portion of
the offer size in excess of Rs.1000,00,00,000/-
More than five thousand crore rupees Rs.10,00,00,000/-
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OFFER PERIOD
Means the period between the date of entering into Memorandum of
Understanding or the public announcement, as the case may be and the date of
completion of offer formalities relating to the offer made under these
regulations.
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OFFER PERIOD
Identified date Date falling on the 10th working day prior to the commencement of the
tendering period, for the purposes of determining the shareholders of
target company to whom the letter of offer shall be sent.
Tendering Period Period within which shareholders may tender their shares in acceptance
of an open offer.(10 working days)
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OFFER PERIOD
Date of acquisition of shares/control triggering PA
Date of payment to shareholders or withdrawal
10 working days within which shareholders tender their
shares
10th working day prior to
commencement of tendering
Period
Identified Date
Te n d e r i n g P e r i o d
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PA TO SEBI, SE & TARGET CO X
OPENING OF ESCROW
ACCOUNT X+2
DPS TO BE PUBLISHED
X+5
DRAFT LO TO BE SUBMITTED TO
SEBI X+10
COMMENT FROM SEBI
X+25
IDENTIFIED DATEX+27
DISPATCH OF LO TO
SHAREHOLDERSX+32
COMMENT OF INDEPENDENT
DIRECTORS OF TARGET COMPANY X+35
ADVERTISEMENT FOR
COMMENCEMENT OF TENDERING PERIOD X+36
OFFER OPENS X+37
OFFER CLOSESX+47
PAYMENT TO SHAREHOLDERS
X+57
Within 2 working days prior to DPS
Within 5 working days from PA Within 5 working days
from the date of DPS
Within 7 days from receipt of comments of SEBI
Within 15days of the draft offer
10th working day prior to the commencement of tendering period
1 day before
Within 12 working days from date of receipt from SEBI
10 days from the opening of issue
Within 10 working days from the expiry of tendering period
Atleast 2 working day before the commencement of
tendering period
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MINIMUM OFFER PRICE FREQUENTLY TRADED SHARES
The offer price is the highest of the following:
Highest negotiated price per share under the share purchase agreement
(SPA) triggering the offer,
Volume weighted average price of shares acquired by the acquirer
during 52 weeks preceding the public announcement (PA),
Highest price paid for any acquisition by the acquirer during 26
weeks immediately preceding the PA,
Volume weighted average market price for 60 days preceding the PA.
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Means the product of the number of equity shares bought
and price of each such equity share divided by the total
number of equity shares bought.
Number of shares bought on a particular day: AMarket Price: B
A1*B1+A2*B2+A3*B3……… Volume weighted Average Price =
A1+A2+A3……………..
VOLUME WEIGHTED AVG PRICE
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VOLUME WEIGHTED AVG MARKET PRICE
The product of the number of equity shares traded on a stock exchange and
the price of each equity share divided by the total number of equity
shares traded on the stock exchange
Number of shares traded on the Stock Exchange on particular day: X
Market Price: YX1*Y1+X2*Y2+X3*
Volume weighted Average Market Price =X1+X2+X3……………..
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MINIMUM OFFER PRICE
MINIMUM OFFER PRICE SHALL BE HIGHEST OF RS.
Highest price paid per share under the agreement 170
Volume weighted average price paid or payable by the acquirer or PAC during the preceding 52 weeks
150.68
The highest price paid or payable for any acquisition by the acquirer or PAC during the preceding 26 weeks preceding date of PA
160
Volume weighted average market price of such shares for a period of 60 trading days preceding date of PA
108.03
MINIMUM OFFER PRICE 170
EXAMPLE – THE DATE OF PA IS 4TH SEPTEMBER 2015
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Volume weighted average price paid or payable by the acquirer or PAC during the preceding 52 weeks
DATE OF ACQUISITION
PRICE PER SHARE(Rs.)(1)
NO OF SHARES ACQUIRED(2)
CONSIDERATION (3=1*2)(Rs.) ( )₹
3.10.2014 150 200 30,00012.11.2014 140 100 14,0002.12.2014 155 250 38,75025.2.2015 145 50 7,25030.3.2015 160 150 24,00014.4.2015 150 200 30,00018.5.2015 140 100 14,00017.6.2015 155 50 7,750TOTAL 1100 1,65,750VOLUME WEIGHTED AVERAGE PRICE (TOTAL OF 3/TOTAL OF 2)
Rs.150.68
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The highest price paid or payable for any acquisition by the acquirer or PAC during the preceding 26 weeks preceding date of PA
DATE OF ACQUISTION PRICE PER SHARE(Rs.)
NO OF SHARES ACQUIRED
7.4.2015 160 150
26.4.2015 150 200
24.5.2015 140 100
3.7.2015 155 50
Highest price paid Rs.160
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Volume-weighted average market price of such shares for a period of 60 trading days preceding date of PA
DATE PRICE PER SHARE(RS.) (1)
NO. OF SHARES TRADED (2)
CONSIDERATION(3=1*2)Rs. ( )₹
27.7.2015 154 12542 19,31,468
12.8.2015 153 9751 14,91,903
20.8.2015 157 7220 11,33,540
Total 42181 45,56,911
Volume weighted average market price (total of 3/ total of 2 )
Rs.108.03
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MINIMUM OFFER PRICE INFREQUENTLY TRADED SHARES
The offer price is the highest of the following:
Highest negotiated price per share under the share purchase agreement (SPA)
triggering the offer,
Volume weighted average price of shares acquired by the acquirer during 52
weeks preceding the public announcement (PA),
Highest price paid for any acquisition by the acquirer during 26 weeks
immediately preceding the PA,
The price determined by the acquirer and the manager to the open offer after taking
into account valuation parameters including book value, comparable trading
multiples, and such other parameters that are customary for valuation of shares of
such companies
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Market Capitalization of a Company
Debt + Minority Interest + Preferred shares
Total Cash + Cash Equivalents
ENTERPRISE VALUE
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ENTERPRISE VALUE IN RS. ( )₹
1) Paid up capital (Number of shares) 20,000
2) Closing Price of preceding day ₹ 10
3) Market Capitalization (1*2) ₹ 2,00,000
4) Debt (Add) ₹ 5,000
5) Minority Interest (Add) ₹10,000
6) Preferred shares (1000*10) (Add) ₹ 10,000
7) Cash and Cash equivalents (Less) ₹ 4,000
8) Enterprise Value (3+4+5+6-7) in Rs. ( )₹ ₹ 2,21,000
ENTERPRISE VALUE
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COMPARISON
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SEBI (Sast Regulation)
1997
Initial Threshold Limit >= 15%
Offer Size – 20 %for all remaining shares
of Voting Capital
Non Compete Fees – permissible upto 25%
of offer price
No Separate provision for Voluntary open
offer
TRAC Report
Initial Threshold Limit >= 25%
Offer Size – 100%for all remaining shares
of the company
No Provision
Separate provision introduced with prior
holding of >=25% and Minimum offer size of
10%
SEBI (Sast Regulation)
2011
Initial Threshold Limit >= 25%
Offer Size – 26 %for all remaining shares
of Voting Capital
Provision Accepted(no compete fees)
Voluntary open offer provisions introduced
subject to certain conditions
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NON-COMPETE FEE Non-compete fee is paid to selling promoters, so that they do not re-enter the
business and pose competition to the acquired company.
• Example - acquisition of controlling stake in Cairn India by Vedanta Resources in
2010, a non-compete fee of Rs. 50 has been added to the acquisition price (Rs
355) to be paid to the selling promoters — Cairn Energy Plc.
As per SEBI Guideline 1997 – Non-compete Fee was Max 25% of the offer price
As per SEBI Guideline 2011 - Any Non Compete fee to be paid should be
included in the offer price paid to Public Shareholders also.
• Objective – To treat all shareholders at par.
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TRIGGER POINTS FOR AN OPEN OFFER
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RATIONALESEBI (SAST) Regulations, 2011 endeavors to protect the interest of the
investors of a listed company
An exit opportunity given to the public shareholders at a highest possible
price where there is a substantial acquisition or Take over
The new Takeover Regulations sought to better ensure that the takeover
markets operate in a fair, equitable and transparent manner.
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TYPES OF OFFER
OPEN OFFER
MANDATORY/ TRIGGERED OFFER
Acquisition of Shares
Acquisition of Control
Indirect Acquisition of
Shares or Control
VOLUNTARY OFFER
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MANDATORY /TRIGGERED OPEN OFFER
SEBI (SAST) Regulations, 2011 provides the triggering events on which the
acquirer is required to give an open offer to the shareholders of the Target
Company.
The event may be signing of Share Purchase Agreement or actual acquisition of
shares from the market or passing of special resolution for preferential basis.
Once the intention of the acquirer goes beyond the threshold limits mentioned
in the regulations, the acquirer is required to give an open offer to the
shareholders of the Target
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ACQUISITION OF SHARES (REGULATION 3)
Initial Threshold Limit
• when the Acquirer after his acquisition along with his initial shareholding
is entitled to have more than 25% or more of the voting rights in the
target company.
Creeping Acquisition Limit
• holding more than 25% but less than 75% shares or voting rights in the
Target Company.
• acquire further upto 5% shares or voting rights in the financial year .
• allowable acquisition of 5% is popularly known as'Creeping Acquisition‘.
Global TrendIndonesia 50%France 33%Hong Kong 30%UK 30%Singapore 30%Australia 20%India 25%
Global TrendIndonesia 10%
France 2%
Hong Kong 2%
UK -
Singapore 1% (in 6 months)
Australia 3% (in 6 months)
India 5%
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SEBI TAKEOVER RESOLUTION, 1997
15%55%
75%1st Trigger
2nd Trigger Creeping Acquisition 5% in a F.Y.
3rd Trigger
25%75%
1st Trigger
2nd Trigger Creeping Acquisition 5% in a F.Y.
SEBI TAKEOVER RESOLUTION, 2011
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QUANTUM OF ACQUISITION OF ADDITIONAL VOTING RIGHTS
1. No Netting off Allowed
• Example :
• where an acquirer holding 56% shares have acquired further 4%
shares in the company during the financial year 2012-13 and sold
of 2% shares in the same financial year, then he can further
acquired only 1% shares without making the Public
Announcement regardless of the fact that he has sold of 2% shares
in the financial year 2012-13.
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CONTD.2. Acquisition of shares by way of issue of new shares
• Difference between the pre-allotment and the post-allotment percentage
voting rights.PARTICULARS PRE
SHAREHOLDINGSHARES TO BE
ALLOTTED PURSUANT TO
PREFERENTIAL ALLOTMENT
POST SHAREHOLDING
CHANGES
NO. OF SHARE
S
% NO. OF SHARES
% NO. OF SHARES
% NO. OF SHARES
%
ACQUIRERS 70 58.3 16 11.99 86 63.33 16 5
OTHERS 50 41.67 50 36.67 0 (5)
TOTAL 120 100 136 100 16 0.00
QUANTUM OF ACQUISITION OF ADDITIONAL VOTING RIGHTS
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CONTD.3. Individual shareholding of Acquirer to be considered
the Individual Acquirer Shareholding shall also be considered for determining the Open
Offer Trigger Points apart from consolidated shareholding of Acquirer and PAC.
ACQUIRER PRE HOLDING CREEPING ACQUISITION
POST HOLDING
APPLICABILITY OF SEBI
(SAST) REGULATIONS
, 2011
A 23% 3% 26% OPEN OFFER OBLIGATIONS
B 7% 2% 9% -
TOTAL 30% 5% 35% -
QUANTUM OF ACQUISITION OF ADDITIONAL VOTING RIGHTS
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ACQUISITION OF CONTROL (REGULATION 4)
Any acquirer including PAC acquires control over the Target Company
irrespective of the fact whether there has been any acquisition of shares or
not, then he has to give public announcement to acquire shares from
shareholders of the Target Company.
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INDIRECT ACQUISITION OF SHARES AND
CONTROL(REGULATION 5)
Acquisition of Voting Rights or control over other entity that enable
the Acquirer to exercise of such percentage of voting or control over
Target Company
Acquirer B UK Ltd.Global Offer
100% 72.93%
Control
Indirect acquistion of 72.93% of the Target Company
Trigger Open Offer
Target Company
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In case of an indirect acquisition where:
• the proportionate net asset value of the target company as a percentage
of the consolidated net asset value of the entity or business being
acquired;
• the proportionate sales turnover of the target company as a percentage
of the consolidated sales turnover of the entity or business being
acquired; or
• the proportionate market capitalisation of the target company as a
percentage of the enterprise value for the entity or business being
acquired
Is greater than 80%, on the basis of the most recent audited annual
financial statements, such indirect acquisition shall be regarded as a direct
acquisition
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VOLUNTARY OPEN OFFER (REGULATION 6) ELIGIBILITY
• Prior holding of atleast 25% or more shares
• No acquisition during the preceding 52 weeks except by way of Open Offer. OFFER SIZE
• Minimum of 10% of the total shares of the Target company CONDITION
• The aggregate share holding not to exceed the maximum permissible non-public shareholding
RESTRICTION
• No further acquisition of shares for a period of six months after completion of the open offer except by way of
• voluntary open offer or• competing offer.
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MODE OF PAYMENT (REGULATION 9)
The offer price may be paid in
1. By Cash
2. By way of Issue, exchange or transfer of Equity share capital of the acquirer or
any PAC.
3. By way of Issue, exchange or transfer of secured debt instruments issued by the
acquirer or PAC. Also the instrument should not be rated inferior by a credit
rating agency registered with SEBI.
4. By way of Issue, exchange or transfer of Convertible Debt Securities entitling the
holder to acquire shares in the Equity share capital of the Acquirer or PAC.
5. A combination of all of the above.
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ESCROW ACCOUNT (REGULATION 17)
An escrow account is a temporary pass through account held by a third party during the
process of a transaction between two parties.
Create an escrow account 2 days before the date of public statement of open offer of
acquiring shares.
The escrow account may be in the form of:
• Cash deposited with any scheduled commercial bank
• Bank guarantee issued in favour of the Merchant banker by any scheduled commercial
bank
• Deposit of frequently traded and freely transferable equity shares or other freely
transferable securities.
Sl. No.
Consideration payable under the Open Offer Escrow Amount
1On the first 500 crore rupees An amount equal to 25% of the consideration
2On the balance consideration An additional amount equal to 10% of the consideration
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The escrow account deposited with the bank in cash shall be released only in the
following manner:
• the entire amount to the acquirer upon withdrawal of offer
• For transfer to the special escrow account, provided the amount so transferred shall
not exceed 90% of the cash deposit
• The acquirer shall get the balance of 10% of the cash deposit on the expiry of 30
days from the completion of payment of consideration to shareholders who have
tendered their shares in acceptance of the open offer.
• If the open offer is for exchange of shares or other secured instruments, the acquirer
gets the entire amount upon the expiry of 30 days from the completion of payment of
consideration to shareholders, upon certification by the Merchant Banker
CONTD.ESCROW ACCOUNT (REGULATION 17)
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FAILURE OF PAYMENTFailure of Payment
In case of non-fulfilment of any of the obligations under these regulations, Merchant Banker
has a right to forfeit the escrow account and distribute the proceeds in the following way:-
• 1/3rd of the escrow account to the target company
• 1/3rd of the escrow account to the Investor Protection and Education Fund established
under the Securities and Exchange Board of India Regulations, 2009
• 1/3 to be distributed on pro rata basis among the shareholders who have accepted the
open offer.
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PAYMENT OF CONSIDERATION (REGULATION 21)
For the amount of consideration payable in cash, the acquirer shall open
a special escrow account with a banker to an issue registered with SEBI
The Acquirer shall complete the payment to the shareholders who have
tendered their shares within 10 working days of the expiry of the
tendering period.
Any unclaimed balances left in the Special escrow Account shall be
transferred to the Investor Protection and Education Fund established
under the SEBI at the end of 7 years from the date of deposit
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DISCLOSURES Disclosure of Acquisition and Disposal
TRIGGERING EVENT DISCLOSURE BY
DISCLOSURE TO TIME PERIOD
Acquisition of 5% or more shares or voting rights
Acquirer & PACs
Target c/o&
stock exchange (s)
Within 2 working days of:
• receipt of intimation of allotment of shares; or
• acquisition of sharesor voting rights
Acquisition or disposal of 2% or more shares or voting rights by the acquirer already holding 5% or more shares or voting rights
Creation or invocation or release of encumbrance* on the shares held by promoter or PACs
Promoter & PACs
Target c/o&
stock exchange (s)
Within 7 working days from the event
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• Continual Disclosures
DISCLOSURES
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DISCLOSURE BY DISCLOSURE TO TIME PERIOD
Acquirer holding 25% or more shares or voting rights Target c/o
& stock exchange
(s)
Within 7 working days from the end of financial year i.e. 31st March
Promoter and PACs
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• Encumbered Shares
DISCLOSURE BY DISCLOSURE TO TIME PERIOD
The promoter of every target company shall disclose details of shares in such target company encumbered or Invocation or release of such encumbrance of shares by him or by persons acting in concert with him in such formas may be specified.
Target c/o& stock exchange (s)
Within 7 working days from the creation or invocation or release ofEncumbrance
DISCLOSURES
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The Following shall be exempt from the obligation to make an open offer :-
Inter Se transfer of shares among qualifying persons
• Immediate Relatives
• Promoters identified in the shareholding pattern filed by the target company
under the listing agreement or Takeover Code for not less than 3 years prior to
the acquisition.
• Persons acting in concert for not less than 3 years prior to the proposed
acquisition, and disclosed as such pursuant to filings under the listing agreement
EXEMPTIONS
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• Looks into application seeking exemption from mandatory open offer
to be made to minority shareholders by the Acquirer.
• Aims at making norms easier and protecting interest of minority
investors.
• The first four member Panel constituted in 2007.
• SEBI reconstituted its Takeover Panel – Newly Notified panel to be
chaired by N.K.Sodhi.
87
TAKE OVER PANEL
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Procedure
• The Board shall for the purposes of this regulation constitute a panel of majority
of independent persons
• The acquirer shall file an application with the Board, giving details of the
proposed acquisition and the grounds on which the exemption has been sought.
• Pay a fee of Rs. 1,00,000 to the Board, either by a bankers cheque or demand
draft in favor of the SEBI, payable at Mumbai.
• The Board shall within 5 days of the receipt of an application, forward the
application to the Panel
TAKE OVER PANEL
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• The Panel shall within 15 days from the date of receipt of application make a
recommendation on the application to the Board
• The Board shall after affording reasonable opportunity to the concerned parties
and after considering all the relevant facts including the recommendations, if
any, pass a reasoned order on the application, within 30 days thereof.
• The order of the Board is then published.
89
TAKE OVER PANEL
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The term Competing Offers refers to an offer given by any other person
(Competitor Acquirer) after an offer has already been given by an acquirer to the
shareholders of the Target Company to acquire the shares held by them
E.g. If ‘A’ (Acquirer) has already given an Open Offer in terms of SEBI (SAST)
Regulations, 2011 to the shareholders of X Ltd. (Target Company) , B (any other
person) also gives the similar offer to the shareholders of the Target Company, then
offer given by B shall be termed as ‘Competing Offer’ in terms of these regulations
COMPETING OFFER
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Made within 15 working days from the date of detailed public statement
Unless the 1st open offer first made is a conditional offer, no acquirer making a
competing offer may be made conditional as to the minimum level of acceptances
The 1st acquirer has a right to revise its offer up to 3 working days prior to the
opening of the offer
Schedule of activities and the offer opening and closing of all competing offers shall
be carried out with identical timelines
COMPETING OFFER
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SIZE OF COMPETING OFFER
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An open offer once made shall not be withdrawn , except for the following circumstances:-
1. If statutory approvals required to make the open offer mention in the detailed public statement letter of open offer have been refused , or are subject to approval.
2. If the acquirer ,being a natural person has died.3. Any condition stipulated in the agreement for acquisition attracting the
obligation to make an open offer is not met for reasons beyond control of the acquirer and the conditions have been mentioned in the letter of offer.
4. Or any other circumstances in which the SEBI board may approve Withdrawal
WITHDRAWAL OF OPEN OFFER
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In the event of withdrawal: (within 2 working days)
1. They must make an announcement in the same newspapers where the open offer was made. It must also provide the reasons for withdrawal of offer
2. Simultaneously they must inform SEBI, Stock exchanges and the target company at its registered office.
WITHDRAWAL OF OPEN OFFER
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Must ensure availability of financial arrangements to pay of any obligations under the open offer and statutory dues that may arise due to open offer.
Alienation of assets: debarred for 2 years
exception : if required , has to be done by passing special resolution by postal ballot by shareholders of target co
Must ensure that PA, DPS, letter of offer,& post Offer advertisement are fair and true and not misleading.
The Acquirer and PAC with him shall not sell shares of the target company held by them, during the offer period.
The acquirer and persons acting in concert with him shall be jointly and severally responsible for fulfillment of applicable obligations under these regulations
OBLIGATION OF ACQUIRER
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After PA has been made, during the offer period the BOD should ensure that the business is conducted in the ordinary and usual manner and must be consistent with past practice.
During the offer BOD of target company & its subsidiaries ,without special resolution by postal ballot cannot
(a) alienate material assets (b) take any material borrowings from outside (c) Issue or allot any new security bearing voting rights . However, (target company or its subsidiaries) may issue any securities which are in accordance with the new takeover deal. may issue shares by way of public issue for which RHP has been filled with
ROC before the PA of open offer. (iii) may issue shares under any rights issue whose record date was before the PA
of open offer
OBLIGATION OF TARGET COMPANY
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(d)cannot implement buy back of shares or effect any other capital structure of the target company.
(e) cannot enter/amend/ terminate any material contracts in which the target co. or its subsidiaries are parties.
(3) The target company shall furnish to the acquirer within 2 working days from the identified date, a list of shareholders and a list of persons whose applications, if any, for registration of transfer of shares.
(4) After closure of the open offer, the target company is required to provide assistance to the acquirer in verification of the shares tendered for acceptance under the open offer
(5) on receipt of the detailed public statement, the board of directors of the target company shall constitute a committee of independent directors to provide reasoned recommendations on such open offer, and the target company shall publish such recommendations in the same paper as the DPS.
Must also be submitted to SEBI, Stock Exchanges and manager to the offer
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Prior to PA , manager must ensure & verify that the Acquirer has adequate funds to meet the obligation under the open offer, & that he will be able to implement such offer.
Shall furnish the due diligence certificate & draft Letter of offer filed under regulation 16 with SEBI
Shall not deal on his own account during the offer period in the shares of the target company.
Must exercise care and diligence and professional judgment to ensure compliance with these regulations
Within 15 working days from the expiry of the tending period manager must file a report with SEBI containing details about confirming the status of completion of the various open offer requirements.
OBLIGATION OF MANAGER ( MERCHANT MANAGER)
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For any non compliance under the SAST code SEBI may:-
• Direct disinvestment of the shares acquired either through public auction or open market.
• Direct the transfer of shares or any proceeds from the directed sale of shares to the investor protection fund ESTD. By SEBI
• Direct the target Co. or any depository not to give effect to any transfer of shares acquired under the violations
• Directing any Acquirer , PAC, Nominee or Proxy not to exercise any voting rights attached to the shares acquired.
• Debar any person from accessing the capital market or dealing in securities for the period directed by SEBI depending on the gravity of non compliance
PENALTIES OF NON COMPLIANCE
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Directing the acquirer to make an open offer for acquiring the shares at such price as directed by SEBI in accordance with the regulations of the SAST code.
Direct the acquirer not to sell or , direct the target company or any of its subsidiaries not to effect any sale of assets contrary to the contents of the offer letter.
Direct the acquirer who has failed/delayed to make an open offer, to pay interest @ rate set by SEBI in accordance with the offer price.
Incase of direction for divestiture of shares acquired by the acquirer and PAC with him , such divestiture will be limited to the maximum permissible non public shareholding.
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‘King of Good Times; Hands over Crown Jewel to
Diageo
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On July 4, 2013, the Diageo Group, a British multinational alcohol
beverages group completed acquisition of United Spirits Limited, a listed
Indian company.
The deal valued at about INR 52 Billion.
The deal was one of the largest transactions especially in the food and
beverages industry, not just in India but across the world.
The deal gave the Diageo Group a much anticipated entry into one of the
world’s fastest growing liquor market (India)
OVERVIEW
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It also saw the maker of leading and marquee global brands such as Smirnoff, Johnnie Walker, Bailey and Guinness, extend its holding to brands such as Black Dog, Bagpiper and McDowell’s.
The consummation of the deal was not without its fair share of challenges. The deal was subjected to a detailed scrutiny by the SEBI as well as the CCI. Apart from the regulatory scrutiny, the deal was also challenged before the Courts by the lenders of the Sellers (especially the Promoter Group).
The deal has been much in discussions, not only because of the legal, regulatory and commercial issues involved, but also due to the high profile promoter, Dr. Vijay Mallya, who many speculated was sanctioning the sale to ease the rising debt in both United Spirits Limited and Kingfisher Airlines.
United Spirits' top brands
* McDowell's No 1 Whisky* McDowell's No 1 Rum* McDowell's Signature* Bagpiper* Old Tavern
Diageo's India brands
* Johnnie Walker* Johnnie Walker Reserve* Smirnoff Vodka* Captain Morgan* Rowsons Reserve(IMFL)* VAT 69* Romanov
OVERVIEWOVERVIEWTOP BRANDS
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1. Target (United Spirits Limited) The Target was incorporated as a public limited company on March 31, 1999
under the Cos Act as ‘McDowell Spirits Limited’
Subsequently, its name was changed to ‘McDowell & Company Limited’ and eventually changed to ‘United Spirits Limited’ on October 17, 2006
It is the flagship company for the spirits business of the UB Group
The Target is engaged in the business of manufacturing and bottling of ‘Indian made – foreign liquor’ (IMFL). It is the largest spirits company in the world by volume
PARTIES INVOLVED
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2. SellersA. UBHL- UBHL is the principal (but not the only) holding company
for the UB Group.UBHL holds significant stakes in the following companies: The Target; United Breweries Limited17 (upto 12.6% of the share capital); Kingfisher Airlines Limited(upto 60.58% of the share capital); and Aventis Pharma Limited. (upto 10.22% of the share capital).
B. KFIL (Kingfisher Finvest India Limited)- Held 4.09% stake in the Target
C. SWEW (SWEW Benefit Company)- Held 0.10% of the share capital of the Target
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D. United Spirits Limited Benefit Trust - Held 2.64% of the shares of the Target and was not classified as part of the Promoter Group
E. PIGL(Palmer Investment Group Limited) - Held 3.35% of the shares of the Target and was not categorized as part of the Promoter Group
F. UB Sports – Held 0.42% of the shares of the Target
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3. Acquirer A. Acquirer The Acquirer (Relay BV) was a wholly owned subsidiary of PAC 1 and
was incorporated on July 13, 2012 in the Netherlands. It appears that the Acquirer was incorporated as a SPV for the purposes
of the Deal.
B. PAC 1 (Diageo Plc) PAC 1 is a leading premium alcoholic beverage maker with its presence
spanning across 180 countries. It is listed on the London Stock Exchange and the New York Stock
Exchange. In India, PAC 1 is present through its wholly owned subsidiary Diageo India. Diageo India has less than 3% of the market share in India.
PAC 1 is parent company of the Acquirer, PAC 2, PAC 3 and PAC 4.
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C. PAC 2 (Diageo Finance Plc) PAC 2 was incorporated as a public limited liability company in
England and Wales. It is a wholly owned subsidiary of PAC 1. PAC 2, along with certain other companies of the Diageo Group, assists
in raising external debt financing for the Diageo Group. The funds available with PAC 2 are lent to companies of the Diageo
Group for their operational or other requirements. It is likely that PAC 2 may have provided the necessary financial
assistance for the Deal. D. PAC 3 (Diageo Capital Plc) PAC 3 was incorporated as wholly owned subsidiary of PAC 1 in
Scotland. PAC 3 performs the same role as PAC 2 for the Diageo Group and may
have likely provided the financial assistance for the Deal.
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E. PAC 4 (Tanqueray Gordan and Company Limited) PAC 4 was incorporated as a wholly owned subsidiary of PAC 1 in
England and Wales. PAC 4’s principal source of income is the dividend it receives from its
subsidiaries. Thus, the cash lying on its books is likely to have been used for the Deal.
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DEAL CONSIDERED BY CCI Presence of other Competitors in Market
There were multiple other players and brands that should be able to compete with the Target and Diageo Group
No Overlap Between Products
CCI further found that the Target and Diageo Group were mostly present in different price spectrums in the branded spirits market with negligible overlap between their products in each of the branded spirits segment
New Products & Benefit of Consumer
CCI was of the view that the Deal would bring new products and more variants of the existing brands at different price points which would ultimately enable the consumer to expand their choice set
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DEAL CONSIDERED BY KARNATAKA HC
The lenders to the UB Group were also able to pose a serious challenge to the
Deal as the Sale Shares were pledged with the lenders.
In the end, the UB Group was able to obtain a clearance from the Karnatak
HC to sell the Sale Shares on the condition that the Sellers would deposit INR 2.5
billion in a nationalized bank as security
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TAX CONSIDERATIONWhy did Diageo Group use an Intermediary Entity (Relay B.V.) as the Acquirer Situated in Netherlands for the Deal?
Primary advantage (especially from a commercial standpoint) is that Netherlands is a developed and stable economy with no significant exchange controls regulations, thus, making movement of funds into and out of Netherlands easy
Netherlands is ranked 29th on the “Ease of Doing Business” parameter (compared to India’s 132nd rank)
Netherlands also has a wide range of bilateral investment treaties (around 105)as well as a good network of tax treaties that allow it to operate harmoniously with various jurisdictions
Netherlands enjoys a favorable tax treaty with India as well allowing for a sale by a Netherlands parent company of shares of an Indian company to any non-resident to be taxed only in Netherlands (and not India)
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MODES OF ACQUISITION PROPOSED
Secondary Purchase
Acquisition of Sale Shares by Acquirer from the Sellers under the SPA representing
17.36% of the Emerging Voting Capital of the Target.
Primary Subscription
Allotment of Subscription Shares by the Target under the PAA representing 10% of
the Emerging Voting Capital.
Open Offer
Open Offer made by Diageo to the Public Shareholders of the Target under the
Takeover Code for the acquisition of 26% shares in the Target.
JM Financials was selected as manager of the open offer.
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1st OPEN OFFER
Diageo acquired 10% stake for Rs 2902 Cr in USL
The open offer for 26 % was unsuccessful as they acquired only 58668
shares as opposed to 3.8 Cr shares in the offer , being a mere 0.2%
stake @RS1440/share
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WHY 1st OPEN OFFER FAILED
The Target, had moved the price of the Target’s shares to INR 1,815.25,
which continued to climb and reached INR 2,045.25 per share at the time
of expiry of the offer period resulting in an average market price during
open offer period of a whooping INR 2,011.66 per share, a near 47%
increase over market price at the time of public announcement
It was unlikely that any shareholder would tender his / her shares for Open
Offer on a stock of a company when:
(i) the offer price was well below the market price at the time of tender; and
(ii) the prospects from the company (in this case the Target) were only likely
to improve as a new and more experienced management, especially a global
liquor giant like Diageo Group, took over
November 2013 it bought 1.96 million shares from the open market at
Rs 2,400 per share valuing the transaction at Rs 472.31 crore . Part of the
stake was acquired through a bulk deal from Morgan Stanley Asia
(Singapore) Pte, which sold off 3.9 million shares on the BSE. This has
taken its holding to 26.3 per cent.
In January 2014 it hiked its stake in United Spirits again by acquiring 2.4
per cent more from a foreign portfolio investor for Rs 866 crore , taking
its holding to 28.7 per cent. The British firm has shelled out around $1.09
billion to buy 28.7 per cent of United Spirits
BEFORE 2nd OFFER
Although Diageo could not manage to buy half of the Indian firm earlier, as
envisaged, by virtue of being the single-largest shareholder and having presence
in the board with its nominees, Diageo was already in the driver’s seat.
In the original agreement, it had ensured that if Diageo is unable to obtain
majority shareholding, UB Holdings will vote as directed by Diageo for a four‐
year period.
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2nd OPEN OFFER
In April 2014, Diageo made its second open offer for United Spirits
Diageo had offered to buy shares at Rs 3,030 a share in the open offer
The offer opened on 6 June 2014 and will end today, 19 June 2014
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POST 2nd OPEN OFFER
On 2nd July 2014 ,Relay B.V acquired 377,85,214 equity shares
representing 26% equity share capital through open offer.
As a result of open offer Relay B.V holds 54.78 % equity share capital of
USL.
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SYNERGY BENEFIT
USL has 40% Market Share
USL has strong sales & distribution network in India
Diageo’s market share increased from 12% to 17% because of distribution provided
by USL
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HAVE A NICE DAY!