SEBI amends delisting rules to make M&A deals more convenient

The securities and exchange board of India (SEBI) has amended the share of a company following an open offer as a part of efforts to make merger and acquisitions transactions for the listed companies more convenient.

Under the new framework, promoters or acquirers need to disclose their intention to delist the firm through an initial public announcement, according to a notification from the regulator.

If the acquirer wishes to delist the target company, the acquirer must propose a higher price for delisting with a suitable premium over the open offer price. In case the open offer is for an indirect acquisition, the open offer price and the indicative price will be notified by the acquirer at the time of making the detailed public statement and in the letter of offer.

“The indicative price shall include a suitable premium reflecting the price that the acquirer is willing to pay for the delisting offer with full disclosure of the rationale and justification for the indicative price so determined that can also be revised upwards by the acquirer before the start of the tendering period,” SEBI said in a notification.

In the existing framework, if an open offer is triggered, compliance with takeover regulations could take the incoming acquirer’s holding to above 75% or perhaps even 90%.

However, to ensure compliance with the Securities Contract (Regulation) Rules, the acquirer would be forced to first bring his stake down to 75% as the SEBI delisting norms would not let the acquirer even attempt delisting unless the holding is first brought down to 75%.

Source: Financial Express