Sebi exempts govt from making open offer for United Bank

The govt has proposed to buy addl 180 million shares in the bank via preferential allotment in lieu of infusing Rs 700 cr investment

Capital market watchdog Sebi has exempted the central government from making an open offer to shareholders of United Bank of India pursuant to equity infusion that would hike its stake in the lender to nearly 88 per cent.

The government, which is the promoter of United Bank, has proposed to buy additional 180 million shares in the lender through preferential allotment route in lieu of infusing Rs 700 crore investment. With the equity infusion, government's stake in the bank would rise to 87.99 per cent from 82.23 per cent.

Securities and Exchange Board of India (Sebi), in an order issued yesterday, exempted the government from making an open offer for the bank's shareholders citing that there would not be any change in management control post equity infusion.      The regulator also said the minimum public shareholding level -- which is 10 per cent for public sector entities -- would remain unaffected after the share purchase by the government.

This was a "fit case to grant exemption" to the government from the obligation to make an open offer as otherwise required under the takeover norms, Sebi said. Under Sebi norms, when entities who hold 25 per cent or more shareholding in a company acquire additional five or more in that particular firm, they are required to make an open offer.

The government has proposed to infuse Rs 700 crore through acquisition of additional 18,00,41,152 shares of United Bank.      
On November 6, United Bank had filed an application with Sebi, on behalf of the government, seeking exemption from making an open offer.