SAST REGULATIONS

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SEBI TAKEOVER REGULATIONS

Transcript of SAST REGULATIONS

  • 1. SEBI (SubstantialAcquisition of Shares& Takeovers)Regulations 2011:Takeover Code

2. Group MembersShalini Devendran 37Swapnali Ghadge 47Shilpee Haldar 50Rupali Helambe 51Priyanka Kadam 66Jenneey Rajani 129Neha Thakur 1672MET MMS SEBI SAST Regulations 2011 10/14/2014 3. Contents Takeover & Types Background of SEBI takeover code Objectives of the Takeover Regulations Definitions Trigger Events to Give Open Offer -Mandatory Offer -Voluntary Offer Offer size Offer Prize Non Compete Fee Mode of Payment Letter of Offer Escrow Account Competing offer3MET MMS SEBI SAST Regulations 2011 10/14/2014 4. Contents Payment of Consideration Open Offer Process Withdrawal of open offer Obligations of the acquirer Obligations of the target company Obligations of the merchant banker Disclosures Exemptions Penalties Case Study Diageo and United spirits Conclusion 5. Takeover Takeover is the process to purchase enough share of a company toovertake the current majority shareholder.OR Takeover implies acquisition of control of a company which is alreadyregistered through the purchase or exchange of shares.5MET MMS SEBI SAST Regulations 2011 10/14/2014 6. Acquiring control The right to appoint majority of the directors or to control themanagement or policy decisions Exercisable by a person or a person acting in concert, directly orindirectly. By virtue of their shareholding or management rights or shareholdersagreements or voting agreements or in any manner.6MET MMS SEBI SAST Regulations 2011 10/14/2014 7. Ways of Acquiring control Control could be acquired through acquisition of Shares. Acquiring Voting Rights through a power of Attorney. Acquiring control over an Investment or Holding company ,which inturns holds controlling interest in the target company. Acquiring management control through formal or informalunderstanding or agreement with the existing person in control.7MET MMS SEBI SAST Regulations 2011 10/14/2014 8. Objective of takeoverSmooth theearning To improve productivity and profitability by joint efforts . To achieve product development through acquiring firms. To effect savings in overheads and other working expenses. To diversify through acquiring companies with new product lines asNewgeographwell as new market shares. To increase market share. To achieve market development.To increase the client base through Vertical integration.8By absorbingcompetitors andset priceresultsiclocations.MET MMS SEBI SAST Regulations 2011 10/14/2014 9. Types of acquisitionAcquisitionLegal ContextBusiness Context9MET MMS SEBI SAST Regulations 2011 10/14/2014 10. Types of acquisitionLegal ContextFriendlyTakeoverHostileTakeoverBail-OutTakeover10MET MMS SEBI SAST Regulations 2011 10/14/2014 11. Types of acquisitionBusinessContextHorizontalVerticalConglomerate11MET MMS SEBI SAST Regulations 2011 10/14/2014 12. Applicability of SAST Takeover can be of a Listed or an Unlisted company In case of Takeover of an Unlisted and closely held company Companies Act, 1956 to apply. In case of Takeover of a Listed company, the following legalframework to apply:- SEBI (Substantial Acquisition of Shares and Takeover) Regulations,2011 issued by the Securities and Exchange Board of India (SEBI)- Companies Act, 1956- Listing Agreement- Securities Contracts Regulation (SCR Act)- FEMA, Competition Act 2002, Industrial Policy- Other govt. policy and procedures12MET MMS SEBI SAST Regulations 2011 10/14/2014 13. History of SEBI takeover code In 1980 Swaraj Paul's case highlighted the need for regulations incase of Takeovers. The need was felt in 1990s when the government initiated the policyof liberalization and globalization Takeovers in India were regulated by Clause 40 in the listingagreement. Takeovers in India were regulated by Clause 40 in the listingagreement. SEBI was established in 1992 as a body corporate under the SEBI Act,1992.13MET MMS SEBI SAST Regulations 2011 10/14/2014 14. History of SEBI takeover code SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1994. Amended a number of times to address the changing circumstancesand needs of corporate sector. November 1995,under the chairmanship of Shri P.N.Bhagwati, formerChief Justice of India was constituted to review the said regulations. SEBI was established in 1992 as a body corporate under the SEBI Act,1992. SEBI (Substantial Acquisition of Shares and Takeover) Regulations,199714MET MMS SEBI SAST Regulations 2011 10/14/2014 15. History of SEBI takeover code Owing to several factors such as M&A activities in India as thepreferred mode of restructuring, the increasing sophistication oftakeover market, decade long regulatory experience and variousjudicial pronouncements, it was felt necessary to review the TakeoverRegulations. In September 2009, the Takeover Regulations Advisory Committee(TRAC) under the chairmanship of (Late) Sri. C. Achuthan wasconstituted by SEBI . In June 2010, the Committee came out with the TRAC Reportproposing some sweeping changes .15MET MMS SEBI SAST Regulations 2011 10/14/2014 16. History of SEBI takeover code SAST Regulations, 2011 come into force with effect from October 22,2011 In 2013 SAST Regulations again get amended and now we have newSAST Regulation 2013. The main purpose for the new takeover code 2013 is to preventhostile takeovers and at the same time, provide some moreopportunities of exit to innocent shareholders who don't wish to beassociated with a particular acquirer.16MET MMS SEBI SAST Regulations 2011 10/14/2014 17. Listing Agreement 40(A) Listing Agreement 40(A) : Minimum level of Public shareholding. The issuer company agrees to comply with the requirements specifiedin Rule 19(2) and Rule 19A of the Securities Contracts (Regulation)Rules, 1957. Where the issuer company is required to achieve the m minimum level of public shareholding specified in Rule 19(2)(b)and/or Rule 19A of the Securities Contracts (Regulation) Rules, 1957. Issuer company shall adopt any of the following methods to raise thepublic shareholding to the required level :-issuance of shares to public through prospectus-offer for sale of shares held by promoters to public throughprospectus.-sale of shares held by promoters through the secondarymarket.17MET MMS SEBI SAST Regulations 2011 10/14/2014 18. Listing Agreement 40(B) Listing Agreement 40(B) : Take Over Offer it is a condition for continued listing that whenever the take-overoffer is made or there is any change in the control of the managementof the company the person who secures the control of themanagement of the company and the company whose shares havebeen acquired shall comply with the relevant provisions of the SEBI(Substantial Acquisition of Shares and Take-Overs) Regulations, 2011.18MET MMS SEBI SAST Regulations 2011 10/14/2014 19. Need of SEBI takeover code To provide a transparent legal framework. To protect the interests of investors. To provide each shareholder an opportunity to exit his investment inthe target company. To ensure that fair and accurate disclosure of all material informationis made. To regulate and provide for fair and effective competition amongacquirers. The process of acquisition and mergers shall be completed in a timebound manner.19MET MMS SEBI SAST Regulations 2011 10/14/2014 20. 6 chaptersChapter IPreliminary-Reg 1: Shorttitle,commencement& applicability-Reg 2:DefinitionsChapter IISubstantialacquisition ofshares, votingrights or control-Reg 3:Substantialacquisition ofshares or votingrights-Reg 4:Acquisition ofcontrol-Reg 5: Indirectacquisition ofshares or control-Reg 6:Voluntary offer-Reg 7: Offersize-Reg 8: Offerprice-Reg 9: Mode ofPayment-Reg 10:Generalexemptions-Reg 11:Exemptions by theBoardChapter IIIOpen offerprocess-Reg 12: Manager toOpen Offer-Reg 13: Timing-Reg 14: Publication-Reg 15: Contents-Reg 16: Filing of letterof offer with the Board-Reg 17: Provision ofEscrow-Reg 18: OtherProcedures-Reg 19: Conditionaloffer-Reg 20: Competingoffers-Reg 21: Payment ofConsideration-Reg 22: Completion ofAcquisition-Reg 23: Withdrawal ofOpen offerChapter IVOther Obligations-Reg 24:Directors of theTarget company-Reg 25:Obligations ofthe acquirer-Reg 26:Obligations ofthe targetcompany-Reg 27:Obligations ofthe Manager tothe Open offerChapter VDisclosures ofshareholding andcontrol-Reg 28:Disclosurerelatedprovisions-Reg 29:Disclosure ofacquisition anddisposal-Reg 30:ContinualDisclosures-Reg 31:Disclosure ofencumberedsharesChapter VIMiscellaneous-Reg 32:Power to issueDirections-Reg 33:Power toremovedifficulties-Reg 34:Amendment tootherregulations-Reg 35:Repeal andSavings10/14/201420 21. DEFINITIONS21MET MMS SEBI SAST Regulations 2011 10/14/2014 22. Reg.2(1)(a)AcquirerAcquirer means:any person who, directly or indirectly,acquires or agrees to acquire whetherby himself, or through, or with personsacting in concert with him, shares orvoting rights in, or control over a targetcompany.22MET MMS SEBI SAST Regulations 2011 10/14/2014 23. Reg.2(1)(q)Person acting in concert Defined in two parts:1) persons who has common objective of acquisition of sharesor exercising control over a target company, an agreement orunderstanding (formal or informal), co-operate directly orindirectly, for acquisition of shares or voting rights in, orexercise of control over the target company2) lists out categories of person or entities that could bepresumed to be acting in concert.- a company, its holding company, subsidiary company and anycompany under the same management or control- a company, its directors, and any person entrusted with themanagement of the company- a mutual fund, its sponsor, trustees, trustee company, andasset management company23MET MMS SEBI SAST Regulations 2011 10/14/2014 24. Control includes righttoReg.2(1)(e)ControlExercisable By virtue of Appoint majority ofdirectors Control the management Control policy decisions By a person individually By PACs Directly or Indirectly Shareholding Management rights Shareholders agreementVoting agreements Any other mannerA director or officer of the target company is not considered in control over it merely byvirtue of such a position24MET MMS SEBI SAST Regulations 2011 10/14/2014 25. Reg.2(1)(b)AcquisitionAcquisition means:directly or indirectly, acquiring oragreeing to acquire shares or votingrights in, or control over, a targetcompany.25MET MMS SEBI SAST Regulations 2011 10/14/2014 26. Reg.2(1)(z)Target companyTarget Company means:a company and includes a bodycorporate or corporation establishedunder a Central legislation, Statelegislation or Provincial legislation forthe time being in force, whose sharesare listed on a stock exchange.26MET MMS SEBI SAST Regulations 2011 10/14/2014 27. Reg. 2(1)(s)PromoterPromoter means:-Person who is in control of the company-Person named as a promoter in anydocument for offer of securities to thepublic or existing shareholders or in theshareholding pattern filed with the stockexchange(s) under the Listing Agreement,whichever is later.27MET MMS SEBI SAST Regulations 2011 10/14/2014 28. Reg. 2(1)(t)Promoter groupPromoter Group meansi. In case the promoter is a body corporate,A subsidiary or holding company of such body corporateA company in which promoter holds 10% or more of the equity capital ora company who holds 10% or more of the equity capital of the promoterAny company, in which a group of individuals or companies orcombinations thereof, who holds 20% or more of the equity capital in thatcompany, also holds 20% or more of the equity capital of the targetcompanyii. In case the promoter is an individual,immediate relative (i.e., spouse or any parent, brother, sister or child ofthat person or of his spouse)Any company in which 10% or more of the share capital is held by thepromoter or his immediate relative or a firm or HUF of which he/any oneor more of them are members28MET MMS SEBI SAST Regulations 2011 10/14/2014 29. Reg.2(1)(v)SharesShares means shares in the equity sharecapital of a target company carrying votingrights, and includes any security which entitlesthe holder thereof to exercise voting rights.29MET MMS SEBI SAST Regulations 2011 10/14/2014 30. Reg.2(1)(j)Frequently traded sharesFrequently Traded Shares means sharesof a target company, in which the tradedturnover on any stock exchange duringthe twelve calendar months preceding thecalendar month in which the publicannouncement is made, is at least tenpercent of the total number of shares ofsuch class of the target company.30MET MMS SEBI SAST Regulations 2011 10/14/2014 31. Reg.2(1)(p)Offer periodOffer Period means:the period between the date of entering intoan agreement, formal or informal, to acquireshares, voting rights in, or control over a targetcompany requiring a public announcement, orthe date of the public announcement, as thecase may be, and the date on which thepayment of consideration to shareholders whohave accepted the open offer is made, or thedate on which open offer is withdrawn, as thecase may be.31MET MMS SEBI SAST Regulations 2011 10/14/2014 32. Reg. 2(1)(za)Tendering periodTendering Period means:the period within which shareholdersmay tender their shares in acceptanceof an open offer to acquire sharesmade under these regulations.32MET MMS SEBI SAST Regulations 2011 10/14/2014 33. Reg.2(1)(k)Identified dateIdentified Date means the date fallingon the tenth working day prior to thecommencement of the tendering period,for the purposes of determining theshareholders to whom the letter of offershall be sent.33MET MMS SEBI SAST Regulations 2011 10/14/2014 34. Reg.2(1)(h)Enterprise valueEnterprise Value means:the value calculated as marketcapitalization of a company plus debt,minority interest and preferredshares, minus total cash and cashequivalents.34MET MMS SEBI SAST Regulations 2011 10/14/2014 35. Reg. 2(1)(zb)Volume Weighted average market priceVolume Weighted Average Market Pricemeans:the product of the number of equityshares traded on a stock exchange and theprice of each equity share divided by thetotal number of equity shares traded onthe stock exchange.35MET MMS SEBI SAST Regulations 2011 10/14/2014 36. Example Volume Weighted Average Market priceSr. No No. of sharestraded(A)Market Price pershare (B)Product of (A)and (B)1 200 500 1,00,0002 300 667 2,00,1003 500 898 4,49,0004 700 450 3,15,0005 600 999 5,99,400TOTAL 2,300 16,63,50036Volume Weighted Average Market price = Product of (A and B) /Total of A=1663500/2300=Rs.723.26MET MMS SEBI SAST Regulations 2011 10/14/2014 37. Reg.2(1)(zc)Volume weighted average priceVolume Weighted Average Price means the product of thenumber of equity shares bought and price of each such equityshare divided by the total number of equity shares bought.Say, No. of shares bought on a particular day AMarket price BVolume weighted average price = A1*B1+A2*B2+A3*B3+.A1+A2+A3+.37MET MMS SEBI SAST Regulations 2011 10/14/2014 38. Recap Takeover & Types Background of SEBI takeover code Objectives of the Takeover Regulations Definitions 39. 6 chaptersChapter IPreliminary-Reg 1: Shorttitle,commencement& applicability-Reg 2:DefinitionsChapter IISubstantialacquisition ofshares, votingrights or control-Reg 3:Substantialacquisition ofshares or votingrights-Reg 4:Acquisition ofcontrol-Reg 5: Indirectacquisition ofshares or control-Reg 6:Voluntary offer-Reg 7: Offersize-Reg 8: Offerprice-Reg 9: Mode ofPayment-Reg 10:Generalexemptions-Reg 11:Exemptions by theBoardChapter IIIOpen offerprocess-Reg 12: Manager toOpen Offer-Reg 13: Timing-Reg 14: Publication-Reg 15: Contents-Reg 16: Filing of letterof offer with the Board-Reg 17: Provision ofEscrow-Reg 18: OtherProcedures-Reg 19: Conditionaloffer-Reg 20: Competingoffers-Reg 21: Payment ofConsideration-Reg 22: Completion ofAcquisition-Reg 23: Withdrawal ofOpen offerChapter IVOther Obligations-Reg 24:Directors of theTarget company-Reg 25:Obligations ofthe acquirer-Reg 26:Obligations ofthe targetcompany-Reg 27:Obligations ofthe Manager tothe Open offerChapter VDisclosures ofshareholding andcontrol-Reg 28:Disclosurerelatedprovisions-Reg 29:Disclosure ofacquisition anddisposal-Reg 30:ContinualDisclosures-Reg 31:Disclosure ofencumberedsharesChapter VIMiscellaneous-Reg 32:Power to issueDirections-Reg 33:Power toremovedifficulties-Reg 34:Amendment tootherregulations-Reg 35:Repeal andSavings10/14/201439 40. Trigger points for open offer40MET MMS SEBI SAST Regulations 2011 10/14/2014 41. Trigger events for open offerOpen OfferMandatory OfferAcquisition of Shares(Reg. 3)Acquisition of Control(Reg. 4)Indirect Acquisition ofShares & Control(Reg. 5)Voluntary Offer(Reg. 6)41MET MMS SEBI SAST Regulations 2011 10/14/2014 42. Reg. 3 Acquisition of sharesSEBI TAKEOVER RESOLUTION, 1997 SEBI TAKEOVER RESOLUTION, 2011Maximumpermissiblenon-publicshareholding42MET MMS SEBI SAST Regulations 2011 10/14/2014 43. The quantum of acquisition of additionalvoting rights:No Netting offAllowedAcquisition ofshares by wayof issue ofnew shares43MET MMS SEBI SAST Regulations 2011 10/14/2014 44. Reg. 4Acquisition of control Irrespective of acquisition, no acquirer shall acquire, directlyor indirectly, control over such target company withoutmaking a public announcement of an open offer for acquiringshares of such target company in accordance with theseregulations44MET MMS SEBI SAST Regulations 2011 10/14/2014 45. Reg 5Indirect Acquisition of shares orcontrol Acquisition of shares or voting rights in, or control over,any company that would enable any person and PAC withhim to exercise such percentage of voting rights in, orcontrol over, a target company, the acquisition of whichwould otherwise attract the obligation to make a publicannouncement shall be considered as an indirectacquisition45MET MMS SEBI SAST Regulations 2011 10/14/2014 46. In case of an indirect acquisition where:the proportionate net asset value of the target company as apercentage of the consolidated net asset value of the entity orbusiness being acquired ; orthe proportionate sales turnover of the target company as apercentage of the consolidated sales turnover of the entity orbusiness being acquired; orthe proportionate market capitalisation of the target company asa percentage of the enterprise value for the entity or businessbeing acquired46Is >80%, on the basis of the most recent audited annual financialstatements, such indirect acquisition shall be regarded as a directacquisitionMET MMS SEBI SAST Regulations 2011 10/14/2014 47. Reg. 6Voluntary open offerELIGIBILITYPrior holding ofatleast 25% ormore sharesNo acquisitionduring thepreceding 52weeks exceptby way of OpenOffer.OFFERSIZEMinimum of10% of thetotal shares ofthe TargetcompanyCONDITIONThe aggregateshare holdingnot to exceedthe maximumpermissible non-publicshareholdingRESTRICTIONNo furtheracquisition ofshares for a periodof six monthsafter completionof the open offerexcept by way of voluntary openoffer or competingoffer.47MET MMS SEBI SAST Regulations 2011 10/14/2014 48. OPEN OFFERANDITS RELATED CONCEPTS48MET MMS SEBI SAST Regulations 2011 10/14/2014 49. SEBI TAKEOVERREGULATIONS,199720%Reg. 7Offer sizeSEBI TAKEOVERREGULATIONS,201126%49Acquirer getting simple majority i.e. 51% (25% + 26%)MET MMS SEBI SAST Regulations 2011 10/14/2014 50. Specific criteria for priceOffer PriceDirect Acquisition(Reg. 8)Frequently TradedSharesInfrequently TradedSharesIndirect Acquisition(Reg. 8)50MET MMS SEBI SAST Regulations 2011 10/14/2014 51. Reg. 8Offer price1997RegulationHigher of weekly high and lowof closing prices for26 weeks Average of daily highand low of last twoOffer Period weeks2011Regulation the averagemarket price of 60trading days priorto the date of thepublicannouncement51MET MMS SEBI SAST Regulations 2011 10/14/2014 52. The minimum offer price should be highest of the following, computed with referenceto the cut-off date:Direct Acquisition[Regulation 8(2)] Indirect Acquisition[Regulation 8(3)]1) The highest negotiated price per shareof the target company for any acquisitionunder the agreement attracting theobligation to make a publicannouncement of an open offer1)The highest negotiated price per shareof the target company for any acquisitionunder the agreement attracting theobligation to make a publicannouncement of an open offer2) Volume weighted average price paid orpayable by the acquirer or PAC during thepreceding 52 weeks#2)Volume weighted average price paid orpayable by the acquirer or PAC during thepreceding 52 weeks*3)The highest price paid or payable forany acquisition by the acquirer or PACduring the preceding 26 weeks#3)The highest price paid or payable forany acquisition by the acquirer or PACduring the preceding 26 weeks*52MET MMS SEBI SAST Regulations 2011 10/14/2014 53. Direct Acquisition[Regulation 8(2)] Indirect Acquisition[Regulation 8(3)]4)For frequently traded shares: volume-weightedaverage market price of such sharesfor a period of 60 trading days#For infrequently traded shares: the pricedetermined by the acquirer and the managerto the open offer taking into accountvaluation parameters4)Volume weighted average market price ofsuch shares for a period of 60 trading days*,for frequently traded shares5) The per share value of the target companycomputed (In case of Deemed DirectAcquisition where net assets value or salesturnover or market capitalization of the targetcompany is more than 15% of consolidatednet asset or sales turnover or the enterprisevalue of the entity or business being acquiredas per latest audited annual financialstatements, the per share value of the targetcompany computed by the acquirer )5)The per share value of the target companycomputed (Where net assets value or salesturnover or market capitalization of the targetcompany is more than 15% of consolidatednet asset or sales turnover or the enterprisevalue of the entity or business being acquiredas per latest audited annual financialstatements, the per share value of the targetcompany computed by the acquirer# Cut-off date: Date on which PA is made *Cut-off date: Earlier of, the date on whichthe primary acquisition is contracted andthe date on which intention or decision tomake primary acquisition is announced53 54. Volume weighted average price paid or payable by theacquirer or PAC during the preceding 52 weeksSuppose the date of public announcement is 30th September 2014Date ofAcquisitionPrice per share(1)No. of sharesacquired (2)Consideration(3=1*2)15.10.2013 150 200 3000025.11.2013 140 100 1400005.1.2014 155 250 3875006.1.2014 145 50 72506.4.2014 160 150 240006.5.2014 150 200 300006.7.2014 140 100 1400016.9.2014 155 50 7750Total 1100 165750Volume weighted average price(Total of 3/Total of 2)150.6854 55. The highest price paid or payable for anyacquisition by the acquirer or PAC during thepreceding 26 weeks preceding date of PADate of Acquisition Price per share No. of sharesacquired6.4.2014 160 1506.5.2014 150 2006.7.2014 140 10016.9.2014 155 50Highest Price Paid16055MET MMS SEBI SAST Regulations 2011 10/14/2014 56. Volume-weighted average market price of suchshares for a period of 60 trading days precedingdate of PADate price Price per share(1)No. of sharesTraded(2)Consideration(3=1*2)01.08.2014 154 12542 193146815.09.2014 153 9751 149190329.09.2014 157 7220 1133540Total 42181 4556911Volume weighted average108.03market price(Total of 3/Total of 2)56MET MMS SEBI SAST Regulations 2011 10/14/2014 57. Minimum Offer PriceMinimum Offer Price shall be highest of Price (Rs)Highest Price paid per share under the Agreement 162Volume weighted average price paid or payable by the acquirer orPAC during the preceding 52 weeks150.68The highest price paid or payable for any acquisition by theacquirer or PAC during the preceding 26 weeks preceding dateof PA160volume-weighted average market price of such shares for aperiod of 60 trading days preceding date of PA108.03Minimum Offer Price 16257MET MMS SEBI SAST Regulations 2011 10/14/2014 58. NON COMPETE FEES58MET MMS SEBI SAST Regulations 2011 10/14/2014 59. Non compete fees - Regulation8(7)59 SEBI takeover regulations, 1997Non compete fees up to 25% of the offer price (Not to be included inthe Offer Price) SEBI takeover regulations, 2011Non compete fees to be included in the Offer PriceMET MMS SEBI SAST Regulations 2011 10/14/2014 60. MODE OF PAYMENT60MET MMS SEBI SAST Regulations 2011 10/14/2014 61. Mode of paymentRegulation 961The offer price may be paid:(a) in cash(b) by issue, exchange or transfer of listed shares in the equity share capital ofthe acquirer or of any person acting in concert(c) by issue, exchange or transfer of listed secured debt instruments issued bythe acquirer or any person acting in concert with a rating not inferior toinvestment grade as rated by a credit rating agency registered with the Board(d) by issue, exchange or transfer of convertible debt securities entitling theholder thereof to acquire listed shares in the equity share capital of the acquireror of any person acting in concert; or(e) a combination of the mode of payment of consideration stated inclause (a), clause (b), clause (c) and clause (d)MET MMS SEBI SAST Regulations 2011 10/14/2014 62. Mode of paymentPROVIDED THAT - Where any shares have been acquired or agreed to be acquired by theacquirer and PAC with him during 52 weeks immediately preceding the date of public announcementconstitute more than 10% of the voting rights in the target company and hasbeen paid for in cash, the open offer shall entail an option to the shareholder to require payment ofthe offer price in cash, and a shareholder who has not exercised an option in his acceptance shall bedeemed to have opted for receiving the offer price in cash62MET MMS SEBI SAST Regulations 2011 10/14/2014 63. Mode of paymentIn case of revision in offer price The mode of payment of consideration may be altered subject to condition that the component of the offer price to be paid in cash prior to suchrevision is not reduced63MET MMS SEBI SAST Regulations 2011 10/14/2014 64. Shares to be issued or exchanged or transferred or the shares to be issued uponconversion of other securities, shall conform to the following requirements: such class of shares are listed on a stock exchange and frequently traded at thetime of the public announcement; such class of shares have been listed for a period of at least two years precedingthe date of the public announcement; the issuer of such class of shares has redressed at least ninety five percent of thecomplaints received from investors by the end of the calendar quarter immediatelypreceding the calendar month in which the public announcement is made;64MET MMS SEBI SAST Regulations 2011 10/14/2014 65. (d) the issuer of such class of shares has been in material compliance with the listingagreement for a period of at least two years immediately preceding the date of thepublic announcement:Provided that in case where the Board is of the view that a company has not beenmaterially compliant with the provisions of the listing agreement, the offer price shallbe paid in cash only;(e) the impact of auditors qualifications, if any, on the audited accounts of the issuerof such shares for three immediately preceding financial years does not exceed fivepercent of the net profit or loss after tax of such issuer for the respective years; and(f) the Board has not issued any direction against the issuer of such shares not toaccess the capital market or to issue fresh shares65MET MMS SEBI SAST Regulations 2011 10/14/2014 66. Where listed securities are offered as consideration, the value of such securities shallbe higher of :1. the average of the weekly high and low of the closing prices of such securitiesquoted on the stock exchange during the six months preceding the relevant date;30 th day priorto theshareholdersmeeting2. the average of the weekly high and low of the closing prices of such securitiesquoted on the stock exchange during the two weeks preceding the relevant date;3. the volume-weighted average market price for a period of sixty trading dayspreceding the date of the public announcement are recorded during the six-monthperiod prior to relevant date66MET MMS SEBI SAST Regulations 2011 10/14/2014 67. LETTER OF OFFER67MET MMS SEBI SAST Regulations 2011 10/14/2014 68. Filing of letter of offer with the Board.Regulation 1668LOF to be filled with SEBI within 5 working days from the date of detailedpublic announcement through manager to the open offer:Consideration payable under open offer Fee (Rs)Up to 10 crore Rs. 1,25,000> 10 crore but 1,000 crore but 5,000 crore Rs. 2,50,00,000 + 0.01% of the offer size inexcess of Rs. 5,000 crore subject tomaximum of Rs. 3,00,00,000MET MMS SEBI SAST Regulations 2011 10/14/2014 69. Reg. 16 Filing of letter of offer withthe Board SEBI shall give its comments on the draft LOF within 15 working days of thereceipt of the draft LOF. If no comments being issued within such period, itshall be deemed that SEBI does not have comments to offer If SEBI has sought clarifications or additional information from the MerchantBanker, the period for issuance of comments shall be extended to the 5thworking day from the date of receipt of satisfactory reply to the clarificationor additional information sought Changes specified shall be carried out by the Merchant banker and theacquirer in the letter of offer before it is dispatched to the shareholders In the case of competing offers, SEBI shall provide its comments on the draftLOF in respect of each competing offer on the same day. If the disclosures in the draft LoF are inadequate, SEBI may call for a revisedLOF69MET MMS SEBI SAST Regulations 2011 10/14/2014 70. ESCROW ACCOUNT70MET MMS SEBI SAST Regulations 2011 10/14/2014 71. Escrow accountReg. 17 the acquirer shall create an escrow account towards security for performanceof his obligations under these regulations71SL. No Consideration payable underthe open offerEscrow Amount1. Up to Rs. 500 crores 25% of consideration2. On the balance consideration An additional amountequal to 10%of the balanceconsiderationMET MMS SEBI SAST Regulations 2011 10/14/2014 72. Acquirer may makean offer conditionalas to minimum levelof acceptanceConditional open offer, 100% of the consideration payable in respect ofminimum level of acceptanceor50% of the consideration payable under the open offer,whichever is higher, shall be deposited in cash in the escrow account72MET MMS SEBI SAST Regulations 2011 10/14/2014 73. 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 scheduledcommercial bank deposit of frequently traded and freely transferable equity shares or otherfreely transferable securitiesThe manager to the open offer shall not release the escrow account until theexpiry of thirty days from the completion of payment of consideration toshareholders who have tendered their shares in acceptance of the open offer73MET MMS SEBI SAST Regulations 2011 10/14/2014 74. The escrow account deposited with the bank in cash shall be released only in thefollowing manner: the entire amount to the acquirer upon withdrawal of offer (regulation 23) for transfer of an amount not exceeding ninety per cent of the escrowaccount, to the special escrow account in accordance with regulation 21 to the acquirer, the balance of the escrow account after transfer of cash tothe special escrow account, on the expiry of thirty days from the completionof payment of consideration to shareholders who have tendered their sharesin acceptance of the open offer, as certified by the manager to the open offer; the entire amount to the acquirer upon the expiry of thirty days from thecompletion of payment of consideration to shareholders who have tenderedtheir shares in acceptance of the open offer, upon certification by themanager to the open offer, where the open offer is for exchange of shares orother secured instruments74MET MMS SEBI SAST Regulations 2011 10/14/2014 75. Failure of Payment In case of non-fulfillment of any of the obligations under these regulations,Merchant Banker has a right to forfeit the escrow account and distribute theproceeds in the following way:-1. 1/3rd of the escrow account to the target company2. 1/3rd of the escrow account to the Investor Protection and EducationFund established under the Securities and Exchange Board of IndiaRegulations, 20093. 1/3 to be distributed on pro rata basis among the shareholders whohave accepted the open offer.75MET MMS SEBI SAST Regulations 2011 10/14/2014 76. Reg. 20Competing Offer: Offer made by the person, other than the acquirer who has made the firstpublic announcement: within 15 working days from the date of detailedpublic statement.76Existingholding of1st acquirerNo. ofsharesproposedto beacquiredunder the1st OfferUnderlyingagreementfor sale ofshares ofthe TargetCompanyExistingholding ofCompetitive acquirer+PAC+No. ofshares tobe acquiredthroughcompetitive offerMET MMS SEBI SAST Regulations 2011 10/14/2014 77. Reg. 20Competing Offer: Unless the 1st open offer made is a conditional offer, no acquirermaking a competing offer may be made conditional as to theminimum level of acceptances. The 1st acquirer has a right to revise its offer up to 3 working daysprior to the opening of the offer. Schedule of activities and the offer opening and closing of allcompeting offers shall be carried out with identical timelines. No person can make a PA of an open offer for acquiring shares, orenter into any transaction that would trigger the Takeover Coderequiring a mandatory open offer, after fifteen working days from thedate of PA of an open offer under the Takeover Code till the expiry ofthe offer period for such open offer.77MET MMS SEBI SAST Regulations 2011 10/14/2014 78. Reg. 21Payment of Consideration: For the amount of consideration payable in cash, the acquirer shallopen a special escrow account with a banker to an issue registered withSEBI. Payment consideration together with 90% of the amount lying in theescrow account transferred, make up the entire sum due and payableto the shareholders as consideration for acceptances. The acquirer shall complete payment of consideration, whether in theform of cash, or issue or exchange or transfer of securities, to allshareholders who have tendered shares in acceptance of the openoffer, within 10 working days of the expiry of the tendering period. Unclaimed balances, if any, lying to the credit of the special escrowaccount, at the end of 7 years from the date of deposit thereof, shall betransferred to the Investor Protection and Education Fund.78MET MMS SEBI SAST Regulations 2011 10/14/2014 79. Appoint aMerchant BankerOpen Offer Process:PublicAnnouncementDetailed PublicAnnouncement(DPA)Identified date to determine thename of the shareholders to whomthe letter of offer should be sentDispatch of Letter ofoffer to shareholders10th working day prior to the commencementPre OfferAdvertisementComments fromBOD of TargetcompanyFiling Draft OfferDocument withSEBIEscrowAccountCopy to SEBI, SE & Target Co.Receipt ofcommentsfrom SEBIWithin 4 working daysRevision ofOffer PriceOpeningof theIssuePost OfferAdvertisementPayment ofConsiderationFinal Report fromMerchant BankClosing ofthe IssueWithin 2 working daysprior to DPAWithin 5 working daysfrom the PAWithin 5 working daysfrom the date of DPAWithin 15 days of thereceipt of draft offerLast day ofCompetitivebidWithin 15 working daysfrom the date of DPAWithin 7 working daysfrom the receipt ofcomments from SEBIWithin 12 working daysfrom date of receipt ofcomments from SEBIBefore the last 3 working daysprior to the commencementof the tendering period1 working days before thecommencement of thetendering period10 days from theopening of issueWithin 5 working daysafter the offer periodWithin 10 workingdays from the expiry ofthe tendering periodWithin 15 working daysfrom the expiry of thetendering periodAt least 2 working days beforethe commencement of thetendering periodof tendering period79MET MMS SEBI SAST Regulations 2011 10/14/2014 80. Reg. 23Withdrawal of Open Offer: An open offer once made cannot be withdrawn except: Statutory approvals required for the open offer have been refused The acquirer, being a natural person, has died any condition stipulated in the agreement is not met for reasons outsidethe reasonable control of the acquirer, and such agreement is rescinded(subject to such conditions having been specifically disclosed in the DPSand the letter of offer); or Circumstances which in the opinion of SEBI merit withdrawal of openoffer In the event of withdrawal, the acquirer shall through the Merchantbanker, within 2 working days, provide grounds and reasons forwithdrawal of Open Offer: make an announcement in the newspapers (same as in case of PA) Inform in writing to SEBI, SE & Target company the stock exchange shall disseminate such information80MET MMS SEBI SAST Regulations 2011 10/14/2014 81. OBLIGATIONS81MET MMS SEBI SAST Regulations 2011 10/14/2014 82. Reg. 25Obligation of Acquirer The acquirer shall ensure that firm financial arrangements have been madefor fulfilling the payment obligations under the open offer. If the acquirer has not declared an intention in the Detailed public statementand the letter of offer to alienate any material assets of the target companyor of any of its subsidiaries whether by way of sale, lease, encumbrance orotherwise outside the ordinary course of business, the acquirer shall bedebarred from causing such alienation for a period of two years after theoffer period.-Provision: Special resolution by shareholders of the Target company by way of apostal ballot Ensure that the contents of the Public announcement, the Detailed publicstatement, the letter of offer and the post-offer advertisement are true, fairand adequate in all material aspects and not misleading and are based onreliable sources. The acquirer and PAC with him shall not sell shares of the target companyheld by them, during the offer period.82MET MMS SEBI SAST Regulations 2011 10/14/2014 83. Reg. 26Obligation of Target Company: The BODs of the target company shall ensure that during the offer period, the businessof the target company is conducted in the ordinary course consistent with past practice. Unless approval of shareholders of the target company, by way of a special resolutionthrough postal ballot is obtained, the BODs of either the target company or any of itssubsidiaries shall not,-Alienate any material assets of the company except in the ordinary course of business-Not to effect any material borrowings outside the ordinary course of business-Not to issue or allot any authorised but unissued securities carrying voting rights-Implement any buy back or effect any change to the Capital structure-Enter into, amend or terminate any material contracts Furnish to the acquirer within 2 working days from the identified date, a list ofshareholders as per the register of members of the target company containing names,addresses, shareholding, etc. Committee of independent directors to provide reasoned recommendations on suchopen offer, at least 2 working days before the commencement of tendering period, andpublish such recommendations in newspaper (same as PA) and a copy to SEBI, SE,Merchant Banker.83MET MMS SEBI SAST Regulations 2011 10/14/2014 84. Reg. 27Obligation of Merchant Banker: Prior to PA being made, it has to ensure that: the acquirer is able to implement the open offer; and firm arrangements for funds through verifiable means have been madeby the acquirer To ensure that the contents of the Public Announcement, the DPSand the letter of offer and the post offer advertisement are true, fairand not misleading. Provide to SEBI a due diligence certificate along with the draft letterof offer. To ensure compliance with these regulations. It shall not deal on his own account in the shares of the targetcompany during the offer period. File a report to SEBI within 15 working days from the expiry of thetendering period.84MET MMS SEBI SAST Regulations 2011 10/14/2014 85. DISCLOSURES OF SHAREHOLDINGAND CONTROL85MET MMS SEBI SAST Regulations 2011 10/14/2014 86. Reg. 28Disclosure-related provisions:86 Aggregate shareholding or Voting rightsDisclosure of: Acquirer Promoter of Target Company PAC of Promoter of Target Companyby whom: Convertible security = regarded as sharesAcquisition & holdingof Convertiblesecurity: Disseminate such information on receiptRole of StockExchange:MET MMS SEBI SAST Regulations 201110/14/2014 87. DisclosuresDisclosures underChapter VReg. 29Disclosure ofacquisition and disposalReg. 30Continual DisclosuresReg.31Disclosure ofEncumbered Securities87MET MMS SEBI SAST Regulations 201110/14/2014 88. Reg. 29Disclosure of acquisition and disposal88Reg. Triggering Event DiscloseDisclosurebyDisclosuretoTime Period29 (1)Acquisition + Heldshares or voting rights:aggregating to 5% ormore shares or votingrightsAggregateShareholdingand votingrightsAcquirer &PAC StockExchangeTargetcompanyWithin 2 workingdays of: receipt ofintimation ofallotment of shares;or acquisition ofsharesor voting rights inthe Target Company29 (2)Acquisition or disposalof 2% or more sharesor voting rights by theacquirer alreadyholding 5% or moreshares or voting rightsEveryacquisition anddisposal of 2%or more sharesMET MMS SEBI SAST Regulations 2011 10/14/2014 89. Reg. 30Continual disclosure89Reg. Disclose Disclosure byDisclosuretoTime Period30 (1)Acquirer holding shares orvoting rights entitling 25% ormore voting rights in TargetCompany as of 31st MarchPerson (holdingshares) and PAC StockExchangeTargetcompanyWithin 7 workingdays from theend of financialyear i.e. 31stMarch30 (2)Aggregate shareholding andvoting rights in Target Companyas of 31st MarchPromoter of Targetcompany and PACof PromoterMET MMS SEBI SAST Regulations 2011 10/14/2014 90. Reg. 31Disclosure of encumbered sharesRegulation Triggering Event Disclosure byDisclosuretoTime Period31(1) and31(2)Creation or invocation orrelease of encumbranceon the shares held byPromoter or PACPromoter &PAC StockExchangeTargetcompanyWithin 7 working days fromthe event Reg. 28(3): Meaning of encumbrance: shall includepledge, lien or any other transaction, by whatever namecalled.90MET MMS SEBI SAST Regulations 2011 10/14/2014 91. StockExchangesite wherethedisclosuresareavailable.91 92. Disclosureof Reg.31(1) and31(2) byUnitedBreweriesHoldingLtd.92 93. TAKEOVER CODEEXEMPTIONS93MET MMS SEBI SAST Regulations 2011 10/14/2014 94. ExemptionsRegulation 10AutomaticExemptionsRegulation 11Exemptions byBoard 95. Regulation 10(1)(a)(i)ImmediateRelativeMeansPerson'sSpouseIncludesPersonParents/ SpouseParentsPersonBrother/SpouseBrotherPersonSister/SpouseSisterPersonandSpouseChild95MET MMS SEBI SAST Regulations 2011 10/14/2014 96. Regulation 10(1) (a)(ii) If there is any transfer of shares between persons shownas promoters in the shareholding pattern filed by theTarget Company as per Listing Agreement or SEBI Takeover RegulationsFor at least 3 years prior to the proposed acquisition96MET MMS SEBI SAST Regulations 2011 10/14/2014 97. Regulation 10(1) (a)(iii)Acquisition pursuant to inter se transfer of shares amongstqualifying parties being: A company, Its subsidiaries, Its holding company, Other subsidiaries of such holding company, Persons holding not less than 50% of the equity shares of suchcompany,Regulation 10(1)(a)(iv)Amongst PACs for not less than three years prior to the proposedacquisition, and disclosed under the listing agreement.97MET MMS SEBI SAST Regulations 2011 10/14/2014 98. The exemption is available subject to the compliance ofthe following conditions: Pricing for the transfer: If the shares of the Target Company are frequently tradedThe acquisition price per share shall not be higher by morethan 25% of the VWAMP for a period of 60 trading dayspreceding the date of issuance of notice for the proposedinter se transfer, as traded on the stock exchange wherethe maximum volume of trading in the shares of the targetcompany are recorded during such period.98MET MMS SEBI SAST Regulations 2011 10/14/2014 99. If the shares of the Target Company areinfrequently traded - The acquisition price shallnot be more than 25% of the price determinedunder Regulation 8(2)(e) of the Regulations.AndTaking into account thevaluation parameters The transferor and transferee shall have compliedwith applicable disclosure requirements99MET MMS SEBI SAST Regulations 2011 10/14/2014 100. Regulation 10(1)(b)Acquisition in the ordinary course of business by: Underwriter registered Stock broker registered on behalf of his client Merchant banker registered with Board or a nominatedinvestor in the process of market making or subscription tounsubscribed portion of issue SCBs acting as escrow agent100MET MMS SEBI SAST Regulations 2011 10/14/2014 101. Regulation 10(1)(C) Acquisition at subsequent stages, by an acquirer whohas made a public announcement of an open offer foracquiring shares pursuant to an agreement ofdisinvestment, as contemplated in such agreement101MET MMS SEBI SAST Regulations 2011 10/14/2014 102. Regulation 10(1)(d) Acquisition pursuant to a scheme Sick Industrial Companies(Special Provisions)Act, 1985 Target company as a transferor company or as a transfereecompany, or reconstruction of the target company, includingamalgamation, merger demerger or Of agreement involving the target company as a transferorcompany or as a transferee company or reconstruction notinvolving the target Companys undertaking includingamalgamation, merger demergerSubject to-102MET MMS SEBI SAST Regulations 2011 10/14/2014 103. 1. The component of cash and cash equivalents inconsideration paid being less than 25% ofconsideration paid under the scheme2. Where after implementation of the scheme ofarrangement, persons directly or indirectly holding atleast thirty three percent of the voting rights in thecombined entity are same as the persons who held theentire voting rights before the implementation of thescheme103MET MMS SEBI SAST Regulations 2011 10/14/2014 104. Acquisition pursuant to provisions of SARFAESI ACT, 2002 Acquisition pursuant to provisions of SEBI DelistingRegulations, 2009 Acquisition of voting rights or preference shares carryingvoting rights arising out of the operation of 87(2) ofCompanies Act, 1956104MET MMS SEBI SAST Regulations 2011 10/14/2014 105. Regulation10(3) An increase in voting rights in a target company of anyshareholder pursuant to buy-back of shares provided Such shareholder reduces his shareholding such that hisvoting rights fall to below the threshold referred to inregulation 3(1) within 90 days from the date on which thevoting rights so increase.105MET MMS SEBI SAST Regulations 2011 10/14/2014 106. Regulation10(4) Acquisition of shares by any shareholder of a targetcompany, up to his entitlement, pursuant to a rights issue;Subject to fulfillment of the following conditions The acquirer has not renounced any of hisentitlements in such rights issue; and The price at which the rights issue is made is nothigher than the ex-rights price of the shares of thetarget company106MET MMS SEBI SAST Regulations 2011 10/14/2014 107. Acquisition of shares in a target company by any person inexchange for shares of another target company tenderedpursuant to an open offer for acquiring shares under theseregulations Acquisition of shares in a target company from state-levelfinancial institutions or their subsidiaries or companiespromoted by them, by promoters of the target companypursuant to an agreement between such transferors andsuch promoter; Acquisition of shares in a target company from a venturecapital fund or a foreign venture capital investor registeredwith the Board, by promoters of the target companypursuant to an agreement between such venture capitalfund or foreign venture capital investor and suchpromoters.107MET MMS SEBI SAST Regulations 2011 10/14/2014 108. The acquirer shall intimate the stock exchange, the detailsof the proposed acquisition in such form as may bespecified, at least four working days prior to the proposedacquisition, and the stock exchange shall forthwithdisseminate such information to the public In respect of any acquisition made pursuant to exemptionprovided for in this regulation, the acquirer shall file areport with the stock not later than four working days fromthe acquisition, and the stock exchange shall forthwithdisseminate such information to the public108MET MMS SEBI SAST Regulations 2011 10/14/2014 109. In respect of any acquisition of or increase in voting rightspursuant to exemption provided the acquirer shall, within21 working days of the date of acquisition, submit areport to the Board giving all details in respect ofacquisitions, along with a nonrefundable fee of rupees 25thousand109MET MMS SEBI SAST Regulations 2011 10/14/2014 110. Exemptions by the Board(Regulation 11) Regulation 11(2): SEBI may for reasons recorded in writing,grant exemption - subject to conditions as the Board deems fitto impose in the interests of investors Regulation 11(2): The Board may grant a relaxation subject tosuch conditions as the Board deems fit to impose in theinterests of investors being satisfied that,The target company is a company in respect of which theCentral Government or State Government or any otherregulatory authority has superseded the board of directors ofthe target company and has appointed new directors underany law for the time being in force, if110MET MMS SEBI SAST Regulations 2011 10/14/2014 111. 1. Such board of directors has formulated a plan which providesfor transparent, open, and competitive process foracquisition of shares or voting rights in, or control over thetarget company to secure the smooth and continuedoperation of the target company in the interests of allstakeholders of the target company2. The process adopted by the board of directors of the targetcompany provides for details including the time when theopen offer for acquiring shares would be made, completedand the manner in which the change in control would beeffected111MET MMS SEBI SAST Regulations 2011 10/14/2014 112. Regulation 11 (3) & 11(4)For seeking exemption underRegulation11 (1) -> The acquirerFor seeking relaxation underRegulation 11(2) -> Target company shall file an applicationwith the Board, supported by a duly sworn affidavit, andgiving details of the grounds on which the exemption hasbeen sought and pay a non-refundable fee of rupees fiftythousand112MET MMS SEBI SAST Regulations 2011 10/14/2014 113. PENALTIES UNDER TAKEOVERREGULATIONS113MET MMS SEBI SAST Regulations 2011 10/14/2014 114. Regulation 32Power of the board Divesting the shares acquired in violation of the regulations anddirecting appointment of Merchant Banker for such divestiture Transfer of shares or any proceeds of a directed sale of sharesacquired in violation of the regulations to Investor Protection andEducation Fund Not to give effect to any transfer of shares acquired or exercisevoting rights attached to the shares acquired in violation of theseregulations Debarring the person from accessing the capital market or dealingin securities Initiate enquiry proceedings against the intermediary registeredfor failure to carry out the requirement of these regulations andothers.114MET MMS SEBI SAST Regulations 2011 10/14/2014 115. Sec. 15H. Penalty for non-disclosure ofacquisition of shares and takeoversIf a person fails to Disclose the aggregate of his shareholding in the body corporatebefore he acquires any shares of that body corporate Make a public announcement to acquire shares at a minimumprice Make a public offer by sending letter of offer to the shareholdersof the concerned Make payment of consideration to the shareholders who soldtheir shares pursuant to letter of offerPenaltyHe shall be liable to a penalty twenty-five crore rupees or threetimes the amount of profits made out of such failure, whicheveris higher.115MET MMS SEBI SAST Regulations 2011 10/14/2014 116. Criminal prosecution undersection 24 of the SEBI Act.In addition to any award of penalty by the AdjudicatingOfficer under the Act, if any person attempts tocontravene any rules or regulations thereof and further,for the non compliance of the directions of theAdjudicating Officer, the person shall be Punishable with imprisonment for a term which shall notbe less than one month, but which may extend to tenyears or with fine which may extend to twenty-five crorerupees or with both.116MET MMS SEBI SAST Regulations 2011 10/14/2014 117. Section 11B of the SEBI ActThe Board may, in the interest of securities market, givedirections, without prejudice to its right to prosecuteunder section 24 of the SEBI Act including:a) Directing the person concerned not to further deal insecurities.b) Prohibiting disposal of securities acquired in violationof these regulations.c) Direct sale of securities acquired in violation of theseregulations.117MET MMS SEBI SAST Regulations 2011 10/14/2014 118. Sec. 11(4) of the SEBI Act:The authority may give the directions to the person in default & thedirections may include the following: Suspend the trading of any security in a recognized stock exchange Restrain persons from accessing the securities market and prohibit anyperson associated with securities market to buy, sell or deal insecurities Suspend any office-bearer of any stock exchange or self-regulatoryorganization from holding such position Impound and retain the proceeds or securities in respect of anytransaction which is under investigation Attach bank accounts of persons involved in violation for a period notexceeding one month Direct any intermediary or any person associated with the securitiesmarket in any manner not to dispose of or alienate an asset formingpart of any transaction which is under investigation118MET MMS SEBI SAST Regulations 2011 10/14/2014 119. Cease and desist order in proceedingsunder section 11D of the ActA Cease and desist order can be passed under this sectionfrom committing or causing any violation of the SEBITakeover Regulations.119MET MMS SEBI SAST Regulations 2011 10/14/2014 120. Adjudication proceedings undersection 15HB of the Act.A residual clause :Liable to a penalty which may extend to one crore120MET MMS SEBI SAST Regulations 2011 10/14/2014 121. USL: King of Good Times HandsOver Crown Jewel to Diageo121MET MMS SEBI SAST Regulations 2011 10/14/2014 122. Parties involved in the dealI. Target (United Spirits limited) United Spirits Limited, is an Indian alcoholicbeverages company, and the world's second-largestspirits company in terms of volume. It is a subsidiary ofthe United Breweries Group. USL exports its products toover 37 countries.II. SellersA. UBHL UBHL principal holding company for UB group Post the deal it holds 7% of the share capital of the target122MET MMS SEBI SAST Regulations 2011 10/14/2014 123. B. KFIL KFIL- wholly owned subsidiary of UBHL Post the deal it holds 4.09% stake in the targetC. SWEW Was incorporated as a co. ltd. By guarantee Post the deal it holds 0.10% of the share capital of the target (was notclassified as part of the promoter group)D. United Spirits Limited Benefits Trust Was formed as private trust USL benefits trust holds the equity shares of the target as treasurystock123MET MMS SEBI SAST Regulations 2011 10/14/2014 124. E. PIGL Was incorporated as a wholly owned subsidiary of the target Prior to the deal it held 3.35% (not classified as part of the promotergroup) Post the deal it ceased to be a shareholder in the targetF. UB Sports Was incorporated as a wholly owned subsidiary of PIGL in Jersey Prior to the deal it held 0.42% Post the deal it ceased to be a shareholder in the target124MET MMS SEBI SAST Regulations 2011 10/14/2014 125. III. Acquirer Diageo plc is a multinational alcoholicbeverages company headquartered in London. It is theworld's largest producer of spirits and a major producerof beer and wine125MET MMS SEBI SAST Regulations 2011 10/14/2014 126. Timetable of the dealSept 21 12 DIAGEO Group holds talk with to buy stake in the targetNov 9 12 Execution of PAA, SHA and the SPA Target board approval for allotment of subscriptionshares pursuant to PAA Public announcement was made for open offerNov 20 12 Publication of detailed public statementNov 27 12 Acquirer files draft letter of offer with SEBI, Target andrelevant stock exchange formally committing to openofferDec 14 13 SHs of the target approve the allotment of thesubscription shares to the acquirerJan 31 13 SEBI conditionally clears DIAGEOs open offer126MET MMS SEBI SAST Regulations 2011 10/14/2014 127. Timetable of the dealFeb 4 13 Acquirer sends a letter through the manager of open offer toSEBI to permit the commencement of tendering period nolater than 12 working days from the receipt of all statutoryapprovals required for the dealFeb 7 13 SEBI allows extension of commencement of tendering periodfor open offer subject to acquirer paying 10% interest p.a. topublic shareholding who tender their equity shares in theopen offerFeb 27 13 CCI clears the deal conditionallyApril 2 13 Date of publication of recommendation by the committee ofindependent directors of targetApril 3 13 Letter of offer dispatched to public shareholding by acquirerfor open offerApril 10 13 Commencement of tendering period for open offerApril 26 13 Date of expiry of tendering period127MET MMS SEBI SAST Regulations 2011 10/14/2014 128. Timetable of the dealMay 13 13 Open offer is completed pursuant to which the acquirerpurchases 58,688 shares in the target representing 0.04% ofthe emerging voting capital of the targetMay 24 13 HC allowed UBHL to sell its shares in the target to the acquirergroup subject to UBHL depositing INR 2,500,000,000 assecurity immediately after completion of transactionMay 27 13 PAA is consummated as target board allots 1,45,32,775 equityshares to acquirerJuly 4 13 Acquirer completes the acquisition of the sale of shares.However the acquirer was unable to acquire 2.38% from USLBenefit Trust as shares were charged as security towardcertain lenders and the same was not released SHA becomes effective and the acquirer, UBHL and KFIL areclassified collectively as promoters or promoter group as pertakeover code128MET MMS SEBI SAST Regulations 2011 10/14/2014 129. Timetable of the dealNov 7 13 Acquirer provides an update on the post open offerstatus regarding equity shares of target held by USL Acquirer states the 26 week deadline within which saleshares were required to be acquired which is to expireon Nov 11 13 will be missedNov 13 13 The 26 week deadline is missed as Diageo group/Promoter group is unable to release the charge onremaining 2.38% shares held by UBL Benefit trust Final shareholding of Diageo group stood at 25.02% ofthe emerging voting capital of the targetDec 20 13 HC delivered its judgement which annuls the sale ofstake by UBHL to the Diageo Group129MET MMS SEBI SAST Regulations 2011 10/14/2014 130. Deal structure (Prior to the deal)Seller (classifiedas promoter)27.78%TargetSellers (notclassified aspromoter)6.51%Others14.71%Institutionalinvestors 51%130MET MMS SEBI SAST Regulations 2011 10/14/2014 131. Preferred deal structureUBHL + KFIL11.50%AcquirerPreferentialallotment 10%Other sellers5.86%Open offer(publicshareholding)26%131MET MMS SEBI SAST Regulations 2011 10/14/2014 132. 132MET MMS SEBI SAST Regulations 2011 10/14/2014 133. 133MET MMS SEBI SAST Regulations 2011 10/14/2014 134. Fall back option 1Preferentialallotment 10%Acquirer< 50.1%Sellers17.36%Open offer(publicshareholding)< 22.66%Votingarrangement134MET MMS SEBI SAST Regulations 2011 10/14/2014 135. Fall back option 2TargetAcquirer< 50.1%Sellers17.36%Votingarrangement17.36%+7.74% =25.1%135MET MMS SEBI SAST Regulations 2011 10/14/2014 136. Final deal structureShareholders Pre dealPreferred deal outcome(% of emerging votingrights)Post deal (% of emergingvoting rights)New promoterAcquirer Nil 53.36% 25.02%Existing and continuing promotersUBHL 18.03% 10% 7%KFIL 9.69% 3.50% 4.41%Other promotercompanies 0.06% 0.04% -Total (UBHL + KFIL+Others) 27.78% 13.54%11.14% (during the offer periodlenders of UBHL had involvedthe pledge over the shares ofthe targetOthersSWEW, USL BenefitTrust, PIGL and UBSports 6.51% negligible2.38% (held by USL benefittrust)Public Shareholders 65.71% 33.10% 61.46%136MET MMS SEBI SAST Regulations 2011 10/14/2014 137. Key deal terms PAA At least INR 16 billion to be used solely for the purpose of repayingdebt of the Target and/or its subsidiaries; The remaining to be used solely in the ordinary course of theTargets business, including as working capital. The subscription of Subscription Shares was subject certaincustomary condition precedents such as:o Statutory approvals including from CCI and GATA.o Approval from the stock exchanges;o Approval from the shareholders of the Target;o Consent from the lenders of the Target;o No material adverse change;o No breach of the warranties by the Target; 138. SPA Approval of the RBI for the acquisition of Sale Shares from PIGL, UBSports and USL Benefit Trust. Execution of escrow agreement between Acquirer, Sellers and lendersand approval from RBI to enable the Acquirer to directly pay thelenders. Order of Kar HC allowing the transfer of the Sale Shares or dismissingthe winding up petitions against UNHL, KFIL and SWEW SHABoard Rights The Promoter Group had the right to appoint one Director so long as itheld approximately 1% of the shares of the Target. The Promoter Group also had the right to recommend independentnon-executive director so long as it held approximately 4.5% of theshares of the Target. The remaining directors would all be appointed by the Diageo Group.To constitute a valid quorum for the board meeting, the presence of atleast 1 director appointed by the Diageo Group was required. 139. Management The Acquirer has the right to appoint the chief executiveofficer, the chief financial officer and head of internal auditof the Target. Further, the Acquirer also has the right through the Targetto appoint a majority of the directors to the boards of eachof the subsidiaries of the Target.Veto Rights The Promoter Group have retained veto rights in respect ofcertain matters such as (a) preferential issuance of equity shares of the Target at adiscount of the volume weighted average price for 30trading days prior to such issuance (b) change of terms of the shares held by UBHL and (c) any voluntary winding up of the Target. The items overwhich veto rights has been given to UBHL do not seem toindicate that UBHL would even have negative control overthe Target. 140. Voting Arrangements- The Sellers agreed to exercise all their voting rights inrespect of the shares held by them in the Target inaccordance with the instructions of the Acquirer, till theearlier of the following events occurred: (a) the date on which the Acquirer acquires not less than50.1% of the voting rights in the Target; and (b) the fourth anniversary of the first day of the first fullannual accounting period of PAC 1 after the completion ofthe acquisition of the Sale Shares under the SPA.Right of First Offer -The Acquirer has a right of first offeragainst any sale of shares by the Promoter Group. Acquisition Restrictions- The Promoter Group was provided a claw back right i.e. ifthe Sellers were required to sell Additional Shares (then forone year after the completion of the acquisition of theAdditional Shares by the Acquirer, the Sellers would havepriority in purchasing shares of the Target to replace thesold Additional Shares. 141. Tag Rights Promoter Group has the right to sell their shares (tag alongright) in the event there is material disposal of shares bythe Acquirer. The Promoter Group would have to sell the shares at thesame price and on the same terms as the Acquirer.Non-Compete- The Sellers are restrained from carrying a business similarto that of the Target during the term of the SHA and twoyears post the termination of the SHA. Interestingly, the letter of offer does not specific if the non-competeis territory specific or not. 142. Financial Obligations Proposed tobe met for the Transaction The Letter of Offer provides that that the consideration for the Deal was to bepaid in cash. The maximum consideration that was payable under the Open Offer, assumingfull acceptance represented 26% of the Emerging Voting Capital of the Target,was INR 54,410,708,160 (Rupees fifty four billion four hundred ten million sevenhundred eight thousand one hundred sixty only) in cash. In accordance with Regulation 17(3)of the Takeover Code, Diageo Group issueda bank guarantee in favour of JM Financial Institutional Securities PrivateLimited (the Open Offer Manager) for an amount of INR 6,191,070,816 (Rupeessix billion one hundred ninety one million seventy thousand eight hundredsixteen only). Escrow account was being created through a Bank Guarantee, as per Regulation17(4) of the Takeover Code, 1% of the consideration amount also had to bedeposited in the escrow account amounting to approx. INR 544,107,082.142MET MMS SEBI SAST Regulations 2011 10/14/2014 143. Reg. 13(g)143Regulation 13(g) of the SAST states that the PA in case of acquireracquiring shares or voting rights in, or control over the targetcompany, under preferential issue, shall be made on the date onwhich special resolution is passed for allotment of shares under sub-section(1A) of section 81 of the Companies Act, 1956.MET MMS SEBI SAST Regulations 2011 10/14/2014 144. Controversy The main contention regarding USL-Diageo deal revolves around theinterpretation of the relevant date for making the publicannouncement (PA) and hence the open offer price. The public announcement date should have been the date ofshareholder approval (i.e. December 13/14, 2012) and hence theopen offer price should have been calculated taking December 13/14,2012 as relevant date. This would have increased the open offer priceto be greater than INR 1,440 given the recent rise in stock prices.144MET MMS SEBI SAST Regulations 2011 10/14/2014 145. Impact of deal on takeover code Takeover Code now requires any acquirer acquiring control or 25% ofthe shares or voting rights in a listed company pursuant to apreferential allotment, to make a public announcement of an openoffer on the date of execution of such preferential allotmentagreement. An acquirer acquiring control or 25% of the shares or voting rights in alisted company pursuant to a preferential allotment can onlywithdraw the open offer if requisite statutory approvals are notobtained.145MET MMS SEBI SAST Regulations 2011 10/14/2014 146. Open offer 2014 Diageo launched the Tender Offer through Relay B.V. (Relay), awholly-owned indirect subsidiary of Diageo Relay currently holds 28.78% of the issued share capital of USL Diageo plc launched a tender offer to the public shareholders ofUnited Spirits Limited to acquire up to 37,785,214 shares in USL,which represents 26% of USL's fully diluted issued share capital as at15 April 2014.146MET MMS SEBI SAST Regulations 2011 10/14/2014 147. Open offer 2014 The Tender Offer was INR 3,030 per share. Price represents a premium of:i. 22.5% to the price at which Diageo last acquired USL shares on 31January 2014; andii. 20.0% to the 60 day VWAP for USL (SEBI regulatory floor price). Diageo funded the consideration payable under the Tender Offerthrough existing cash resources and debt.147MET MMS SEBI SAST Regulations 2011 10/14/2014 148. Thank You148MET MMS SEBI SAST Regulations 2011 10/14/2014