There are two main players in the manufacturing, export and domestic sale of footwear namely, Big Ltd and Little Ltd. The production capacity of Little Ltd is much lower than Big Ltd but due to technical expertise its cost of production is much less than of Big Ltd. To eliminate competition from market and to acquire technical expertise, Big Ltd started to acquire stake in Little Ltd initially by creeping acquisition and at later stage by making an open offer. The last offer price was Rs 100 per share (nominal value Rs10 each) and it acquired 90% of shares of Little Ltd in value. Though Big Ltd enjoys the controlling power of Little Ltd. Big Ltd wants to make Little Ltd as 100% subsidiary of Big Ltd. But some shareholders are not willing to surrender their shares at that price i.e. Rs 100 each and informally demanded Rs 300 per. The management seeks your opinion as a Company Secretary pursuant to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 to show gateway/roadmap to acquire the balance shares of Little Ltd.
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Case study
Revision of Offer Price under Regulation 18 (4 & 5) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
Hi,, This is a tricky question.
Facts:
1. Target co. is a public listed co.
2. Acquirer holds 90% of shares in target co.
3. It is a listed co. and a company other than public sector co.
4. Takeover code applies.
Discussion:
Takeover code applies listed companies only.
2. All listed companies other than public sector companies shall maintain minimum 25% of public shareholding
3. If promotor holding increases above 75% they shall take steps to reduce to 75%.
4. Here, acquirer co promotors holds 90% share holding
5. Acquirer i.e. the holding co wants to make the target co 100% subsidiary
6. Remaining 10% shareholders of target co are ready to sell their shares at an enhanced price.
7. To resolve:
Road map:
1.Delist the target co being the acquirer is major shareholder.
2.Apply sec.395 of the companies act.
3. Complete the procedure
4. Comply all the requirements
5. Make the co. 100% subsidiary
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