Change in the Takeover code, A boon or bane???

SEBI new regulations over the takeover code regulations clearly indicates the Indian M&A scenario is all set for a makeover

1.    The increase in threshold limit for a public offer from 15% to 25%

2.     Requirement to give an exit opportunity to 100% public shareholders via a public offer as compared to the minimum 20% now.

The outcomes of the proposal could mean:

Small investors are to gain big time:

The takeover panel, formed by Sebi in September 2009, has recommended an increase in the open offer trigger from 15 per cent to 25 per cent. Further, the open offer has to be made for all the shares of the target company, instead of the current practice of an offer for acquiring an additional 20 per cent. This would encourage investors taking strategic stakes in companies.

Mergers & Acqusition would become more expensive as:

a.    The committee has recommended that a short public announcement should be made by the acquirer on the date of entering in to an agreement within five business days thereafter.

b.    The overall timeline for an open offer has been brought down from 97 days to 57 business days.

c.     The panel has also recommended that creeping acquisition be permitted only for acquirers who hold more than 25 per cent of the voting capital.

 Interests rates in the future to shoot up:

According to the New Takeover code, companies would now need to pool in more cash reserves through buybacks & loans from the banks. This would in turn result in increase in the interest rates.

Source : sify/ET/Business Standard

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