Sebi raises buyout trigger for open offers

The Securities and Exchange Board of India on Thursday eased takeover rules, know-your customer norms and set ground rules for purchase of mutual funds. HT reports. What the regulator wants

The Securities and Exchange Board of India (Sebi) on Thursday eased takeover rules, know-your customer (KYC) norms and set ground rules for purchase of mutual funds.

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Its board raised the initial trigger for open offer to minority shareholders in takeovers to 25% from 15% earlier and lifted the minimum open offer size to 26% from 20% earlier and contrary to the 100% proposed by the Takeover Regulations Advisory Committee (Trac) headed by C Achuthan.

The board headed by chairman UK Sinha, also decided that there would be no separate provision for non-compete fees that acquirers pay to the sellers in merger and acquisition deals.

“From an earlier proposed 100%, Sebi has restricted the open offer to 26% and that has made the job of an acquirer easier and that of the existing management difficult,” said the head of a leading domestic investment bank.

While the recommendation on the trigger has been accepted, for offer size it has been kept lower due to opposition from industry and other market participants.

The Achuthan committee argued that all public shareholders were required to be given an exit opportunity in case of promoters of target company sell out their stake and hence a mandatory 100% open offer should be there.

Sinha’s board also took decisions to smoothen sale of mutual funds in which his predecessor, CB Bhave had banned entry loads in August 2009.

Sebi also decided to introduce a new short and simple form for IPO investors to increase retail participation.