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TAKEOVERS

DEFINITION Purchasing of Controlling Interest in another Company. DEFINITIONS AS PER SEBI GUIDELINES acquisition means, directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company acquirer means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert (PAC) with him, shares or voting rights in, or control over a target company control includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner SUBSTANTIAL ACQUISITION OF SHARES Basis Threshold Limit Minimum offer size Creeping acquisition Non-Compete fees SEBI Takeover Code, 2011 When an acquirers shareholding in a listed firm reaches 25%, the acquirer has to bring a public offer to the existing shareholders The acquirer has to bring a public offer to acquire another 26% of the voting share capital of the target Company An acquirer holding 25% or more shares in a target company will have to bring a mandatory public offer if he acquires more than 5% voting rights in the target company in a Financial Year No payment in the nature of non-compete fees is allowed under the new rules

VOLUNTARY OPEN OFFER Basis Eligibility SEBI Takeover Code, 2011 1. An acquirer who holds twenty-five per cent or more shares or voting rights in a target company 2. No Acquisition during the preceding 52 weeks without attracting the obligation to make a public announcement. Minimum 26% of the voting share capital of the target Company An acquirer shall not be entitled to acquire any shares of the target company for a period of six months after completion of the open offer Should not be lower than : 1. the highest negotiated price per share of the target company for any Acquisition 2. the volume-weighted average price paid by acquirer during the fifty-two weeks immediately preceding the date of the public announcement 3. the highest price paid or payable for any acquisition during the twenty six weeks immediately preceding the date of the public announcement 4. the volume-weighted average market price of such shares for a period of sixty trading days immediately preceding the date of the public Announcement

Offer Size Restriction

Offer Price

DISCLOSURES OF SHAREHOLDING AND CONTROL Disclosure of Acquisition and Disposal Any acquirer who acquires shares or voting rights aggregating to five per cent or more of the shares of such target company Any acquirer holding five per cent or more of the shares shall disclose every acquisition or disposal of shares of such target company representing two per cent or more of the shares or voting rights Continual Disclosure Every person holding shares or voting rights entitling him to exercise twenty-five per cent or more of the voting rights in a target company The promoter shall disclose their aggregate shareholding and voting rights

TAKEOVER TACTICS Bear Hug : When the acquirer threatens to make an open offer, the board of target company agrees to a settlement with acquirer for change of control Street Sweep : The acquiring company accumulates larger number of shares in the target company before making an open offer Strategic Alliance : Offering a partnership rather than a buyout. Brand Power : Entering into an alliance with powerful brands to displace target companys brands and as a result buyout the weakened company. DEFENSIVE TACTICS Divestiture : The Target company divests or spins off some of its businesses in the form of an independent subsidiary company. Crown Jewels Poison Pill : The tactics used by the acquiring company to make itself unattractive to a potential bidder. Poison Put : Target company issues bonds that encourage holder to cash in at higher prices. Greenmail : It refers to an incentive offered by the management of the target company to the potential bidder for not pursuing the takeover. White Knight : Target company offers to be acquired by a friendly company to escape from hostile takeover. White Squire : It involves selling out the shares to a company that is not interested in the takeover. Golden Parachutes : When a company offers hefty compensations to its managers if they get ousted due to takeover, the company is said to offer golden parachutes. Pac-man Defense : This strategy aims at the target company making a counter bid for the acquirer company.