SAT directs Sebi to decide on Fresenius delisting

Tribunal disposes appeal; asks regulator to take a view after personal hearing

The Securities Appellate Tribunal (SAT) today disposed of an appeal filed by Fresenius Kabi Oncology against a Securities and Exchange Board of India (Sebi) order that scuttled the company’s plan to delist.

The tribunal directed Sebi to give a personal hearing to the company and pass a “rational and reasonable” order within four weeks. It also asked Fresenius to file a reply to Sebi, detailing all the facts and circumstances of its delisting offer.

On June 4, Sebi had passed an order against about 100 companies, including Fresenius, for not meeting minimum public shareholding norms.

As the order barred promoters of these companies from dealing in the company’s shares, it had potentially rendered the multinational pharmaceutical company’s delisting bid untenable.

SAT member Jog Singh today said Fresenius stood on a “different footing” compared to those called upon by Sebi to show a cause for not meeting the public shareholding norm. He added the company had made progress, in terms of completing delisting formalities.

The company has already complied with 15 of the 25 delisting requirements. It had requested the tribunal to allow it to go ahead with its delisting schedule.

Legal experts say the bone of contention in this case is a u-turn by the company---it had decided to delist after selling nine per cent promoter stake through an offer for sale.

J N Gupta, founder and managing director, Stakeholders Empowerment Services and former executive director, Sebi, feels the company’s offer for sale should be considered void, as this route was only allowed for companies aiming to meet the minimum public shareholding norm; Eventually, Fresenius couldn’t meet the target.

“Delisting is a right made available to a company. The regulator cannot say no, provided it has been done in a fair manner,” said Gupta.

“The OFS (offer for sale) was done for compliance of MPS (minimum public shareholding) and the requirement was not fulfilled. Therefore, for the purpose of determining the quantum of shares to be bought for delisting, a pre-OFS position should be considered. The company should reach 95 per cent promoter holding for delisting,” he added. Before the company sold nine per cent stake through an offer for sale in October 2012, promoter holding in Fresenius stood at 90 per cent.

According to Sebi regulations, for delisting, a promoter should increase shareholding to 90 per cent or buy back at least half the public shareholding, whichever is higher.
TIMELINE

• Oct 12, 2012: Fresenius promoters sell 9% stake through OFS
• April 17: Fresenius board approves proposal to delist
• May 25: Fresenius gets shareholder approval to delist
• June 4: Sebi bars company for non-compliance of MPS
• June 19: Fresenius appeals in SAT against Sebi order
• June 24: SAT directs Sebi to pass rational order post after hearing the matter personally