Regulation 20 - Offer price. - Securities And Exchange Board of India(Substantial Acquisition of Shares And Takeovers) Regulations, 1997

1 [Offer price. 20. (1) The offer to acquire shares under regulation 10, 11 or 12 shall be made at a price not lower than the price determined as per sub-regulations (4) and (5). (2) The offer price shall be payable- (a) in cash; (b) by issue, exchange and/transfer of shares (other than preference shares) of acquirer company, if the person seeking to acquire the shares is a listed body corporate; or (c) by issue, exchange and, or transfer of secured instruments of acquirer company with a minimum A grade rating from a credit rating agency registered with the Board; (d) a combination of clause (a), (b) or (c) : Provided that where the payment has been made in cash to any class of shareholders for acquiring their shares under any agreement or pursuant to any acquisition in the open market or in any other manner during the immediately preceding twelve months from the date of public announcement, the letter of offer shall provide an option to the shareholders to accept payment either in cash or by exchange of shares or other secured instruments referred to above: Provided further that the mode of payment of consideration may be altered in case of revision in offer price or size subject to the condition that the amount to be paid in cash as mentioned in any announcement or the letter of offer is not reduced. (3) In case the offer price consists of consideration payable in the form of securities issuance of which requires approval of the shareholders, such approval shall be obtained by the acquirer within 2 [seven] days from the date of closure of the offer: Provided that in case the requisite approval is not obtained, the acquirer shall pay the entire consideration in cash. (4) For the purposes of sub-regulation (1), the offer price shall be the highest of- (a) the negotiated price under the agreement referred to in sub-regulation (1) of regulation 14; (b) price paid by the acquirer or persons acting in concert with him for acquisition, if any, including by way of allotment in a public or rights or preferential issue during the twenty-six week period prior to the date of public announcement, whichever is higher; (c) the average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are most frequently traded during the twenty-six weeks or the average of the daily high and low of the 3 [***] prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, whichever is higher: 4 [Provided that the requirement of average of the daily high and low of the closing prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, shall not be applicable in case of disinvestment of a Public Sector Undertaking.] Explanation .-In case of disinvestment of a Public Sector Undertaking, the relevant date for the calculation of the average of the weekly 5 [***] prices of the shares of the Public Sector Undertaking, as quoted on the stock exchange where its shares are most frequently traded, shall be the date preceding the date when the Central Government or the State Government opens the financial bid. (5) Where the shares of the target company are infrequently traded, the offer price shall be determined by the acquirer and the merchant banker taking into account the following factors: (a) the negotiated price under the agreement referred to in sub-regulation (1) of regulation 14; (b) the highest price paid by the acquirer or persons acting in concert with him for acquisitions, if any, including by way of allotment in a public or rights or preferential issue during the twenty-six week period prior to the date of public announcement; (c) other parameters including return on networth, book value of the shares of the target company, earning per share, price earning multiple vis-a-vis the industry average : Provided that where considered necessary, the Board may require valuation of such infrequently traded shares by an independent merchant banker (other than the manager to the offer) or an independent chartered accountant of minimum ten years standing or a public financial institution. Explanation.- (i) For the purpose of sub-regulation (5), shares shall be deemed to be infrequently traded if on the stock exchange, the annualised trading turnover in that share during the preceding six calendar months prior to the month in which the public announcement is made is less than five per cent (by number of shares) of the listed shares. For this purpose, the weighted average number of shares listed during the said six months period may be taken. (ii) In case of disinvestment of a Public Sector Undertaking, the shares of such an undertaking shall be deemed to be infrequently traded, if on the stock exchange, the annualised trading turnover in the shares during the preceding six calendar months prior to the month, in which the Central Government or the State Government as the case may be opens the financial bid, is less than five per cent (by the number of shares) of the listed shares. For this purpose, the weighted average number of shares listed during the six months period may be taken. (iii) In case of shares which have been listed within six months preceding the public announcement, the trading turnover may be annualised with reference to the actual number of days for which the shares have been listed. (6) Notwithstanding anything contained in sub-regulation (5), in case of disinvestment of a Public Sector Undertaking, whose shares are infrequently traded, the minimum offer price shall be the price paid by the successful bidder to the Central Government or the State Government, arrived at after the process of competitive bidding of the Central Government or the State Government for the purpose of disinvestment. (7) Notwithstanding anything contained in the provisions of sub-regulations (2), (4), (5) and (6), where the acquirer has acquired shares in the open market or through negotiation or otherwise, after the date of public announcement at a price higher than the offer price stated in the letter of offer, then, the highest price paid for such acquisition shall be payable for all acceptances received under the offer: Provided that no such acquisition shall be made by the acquirer during the last seven working days prior to the closure of the offer: 6 [Provided further that nothing contained in sub-regulation (7) shall be construed to authorise an acquirer who makes a public announcement in terms of sub-regulation (2A) of regulation 11 to acquire any shares during the offer period in the open market or through negotiation or in any other manner otherwise than under the public offer.] (8) Any payment made to the persons other than the target company in respect of non- compete agreement in excess of twenty-five per cent of the offer price arrived at under sub-regulation (4) or (5) or (6) shall be added to the offer price. (9) In case where shares or secured instruments of the acquirer company are offered in lieu of cash payment, the value of such shares or secured instruments shall be determined in the same manner as specified in sub-regulation (4) or sub-regulation (5) to the extent applicable, as duly certified by an independent merchant banker (other than the manager to the offer) or an independent chartered accountant of a minimum ten years standing or a public financial institution. (10) The offer price for partly paid up shares shall be calculated as the difference between the offer price and the amount due towards calls-in-arrears or calls remaining unpaid together with interest, if any, payable on the amount called up but remaining unpaid. (11) The letter of offer shall contain justification or the basis on which the price has been determined. Explanation .─ (i) The highest price under clause (b) or the average price under clause (c) of sub-regulation (4) may be adjusted for quotations, if any, on cum-rights or cum-bonus or cum-dividend basis during the said period. (ii) Where the public announcement of offer is pursuant to acquisition by way of firm allotment in a public issue or preferential allotment, the average price under clause (c) of sub-regulation (4) shall be calculated with reference to twenty-six week period preceding the date of the board resolution which authorised the firm allotment or preferential allotment. (iii) Where the shareholders have been provided with an option to accept payment either in cash or by way of exchange of security, the pricing for the cash offer could be different from that of a share exchange offer or offer for exchange with secured instruments provided that the disclosures in the letter of offer contains suitable justification for such differential pricing and the pricing is subject to other provisions of this regulation. (iv) Where the offer is subject to a minimum level of acceptance, the acquirer may, subject to the other provisions of this regulation, indicate a lower price for the minimum acceptance up to twenty per cent, should be the offer not receive full acceptance. (12) The offer price for indirect acquisition or control shall be determined with reference to the date of the public announcement for the parent company and the date of the public announcement for acquisition of shares of the target company, whichever is higher, in accordance with sub-regulation (4) or sub-regulation (5).] ---------------- Notes: 1. 1 Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Earlier regulation 20 was amended by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2002, w.e.f. 29-1-2002, SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2001, w.e.f. 17-8-2001 and by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 1998, w.e.f. 28-10-1998. Prior to its substitution, regulation 20 read as under: 20. Minimum offer price.-( 1) The offer to acquire the shares under regulation 10, 11 or 12 shall be made at a minimum offer price which shall be payable- (a) in cash; or (b) by exchange and/or transfer of shares of the acquirer company, if the person seeking to acquire the shares is a listed body corporate; or (c) by exchange and/or transfer of secured instruments with a minimum of A grade rating from a credit rating agency; (d) a combination of clause (a), (b) or (c) : Provided that where payment has been made in cash to any class of shareholders for acquiring their shares under any agreement or pursuant to any acquisition in the open market or in any other manner during the preceding 12 months from the date of public announcement, the offer document shall provide that the shareholders have the option to accept payment either in cash or by exchange of shares or other secured instruments referred to above. (2) For the purposes of sub-regulation (1), the minimum offer price shall be the highest of- (a) the negotiated price under the agreement referred to in sub-regulation (1) of regulation 14; (b) the highest price paid by the acquirer or persons acting in concert with him for any acquisitions, including by way of allotment in a public or rights issue, if any, during the 26 week period prior to the date of public announcement; (c) the price paid by the acquirer under a preferential allotment made to him or to persons acting in concert with him at any time during the twelve months period up to the date of closure of the offer; (d) the average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are most frequently traded during the 26 weeks preceding the date of public announcement. Explanation .-In case of disinvestment of a Public Sector Undertaking, the relevant date for the calculation of the average of the weekly high and low of the closing prices of the shares of the Public Sector Undertaking, as quoted on the stock exchange where its shares are most frequently traded, shall be the date preceding the date when the Central Government opens the financial bid. (3) Where the shares of the target company are infrequently traded, the offer price shall be determined by the issuer and the merchant banker taking into account the following factors : (a) the negotiated price under the agreement referred to in sub-regulation (1) of regulation 14; (b) the highest price paid by the acquirer or persons acting in concert with him for acquisitions including by way of allotment in a public or rights issue, if any, during the twenty-six week period prior to the date of public announcement; (c) the price paid by the acquirer under a preferential allotment made to him or to persons acting in concert with him at any time during the twelve month period up to the date of closure of the offer; and (d) other parameters including return on net worth, book value of the shares of the target company, earning per share, price earning multiple vis-a-vis the industry average. Explanation .-(i) For the purpose of this clause, shares will be deemed to be infrequently traded if on the stock exchange, the annualised trading turnover in that share during the preceding six calendar months prior to the month in which the public announcement is made is less than two per cent (by number of shares) of the listed shares. For this purpose, the weighted average number of shares listed during the said six months period may be taken. (ia) In case of disinvestment of a Public Sector Undertaking, the shares of such an undertaking shall be deemed to be infrequently traded, if on the stock exchange, the annualised trading turnover in the shares during the preceding six calendar months prior to the month, in which the Central Government, opens the financial bid, is less than two per cent (by the number of shares) of the listed shares. For this purpose the weighted average number of shares listed during the six months period may be taken. (ii) In the case of shares which have been listed within six months preceding the public announcement, the trading turnover may be annualised with reference to the actual number of days for which the share has been listed. (3A) Notwithstanding anything contained in sub-regulation (3), in case of disinvestment of a Public Sector Undertaking, whose shares are infrequently traded, the minimum offer price shall be the price paid by the successful bidder to the Central Government, arrived at after the process of competitive bidding of the Central Government for the purpose of disinvestment. (4) Notwithstanding the provisions of sub-regulations (1), (2) and (3) above, where the acquirer has acquired shares in the open market or through negotiation or otherwise, after the date of public announcement at a price higher than the minimum offer price stated in the letter of offer, then the highest price paid for such acquisition shall be payable for all acceptances received under the offer: Provided that no such acquisition shall be made by the acquirer during the last seven working days prior to the closure of the offer. (5) In a case where shares or secured instruments of the acquirer company are offered in lieu of cash payment, the value of such shares or secured instruments shall be determined in the same manner as mentioned in sub-regulations (2) and (3) above to the extent applicable, as duly certified by an independent Category I Merchant Banker (other than the managers to the offer) or an independent Chartered Accountant of 10 years standing. (6) The letter of offer shall contain justification on the basis on which the price has been determined. Explanation .-(1) The highest price under clause (b) or the average price under clause (d) of sub-regulation (2) may be adjusted for quotations, if any, on cum-rights or cum-bonus or cum-dividend basis during the said period. (2) Where the public announcement of offer is pursuant to acquisition by way of firm allotment in a public issue or preferential allotment, the average price under clause (d) of sub-regulation (2) shall be calculated with reference to the 26 week period preceding the date of the board resolution which authorised the firm, preferential allotment. (3) Where the shareholders have been provided with an option to accept payment either in cash or by way of exchange of security then subject to the provisions of regulation 20, the pricing for the cash offer could be different from that of a share exchange offer or offer for exchange with secured instruments, provided that the disclosures in the offer documents contain suitable justification for such differential pricing. (4) Where the offer is subject to a minimum level of acceptances the acquirer may subject to the provision of regulation 20, indicate a lower price for the minimum acceptance of 20 per cent, should the offer not receive full acceptance. 2. Substituted for twenty one days by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2004, w.e.f. 3-9-2004. 3. The word closing omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2004, w.e.f. 3-9-2004. 4. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2002, w.e.f. 18-12-2002. 5. The words or daily high and low of the closing omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2002, w.e.f. 18-12-2002. 6. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f- 26-5-2006. Prior to its substitution the proviso read as under: Provided further that the shares or voting rights so acquired taken together with the acquisition under the public offer and shares or voting rights, if any, held by him or by persons acting in concert with him, do not result in public shareholding in the target company being reduced to a level below the limit specified in the Listing Agreement with the stock exchange for the purpose of listing on continuous basis.