Sebi eases takeover rules to help Satyam bidders

Stock market regulator Securities and Exchange Board of India, or Sebi, today relaxed the takeover norms for distressed companies whose board has been superseded by the government.

Although the regulator did not name a company, market players said the relaxation would help Satyam Computer Services find a buyer. The government had superseded the information technology company's board after its founder Ramalinga Raju confessed to fudging of accounts.

The regulator had earlier this month said it would relax the takeover norms to deal with cases like Satyam Computer, whose government-appointed board had sought a relaxation of the acquisition rules.

Today, Sebi said it would not allow competitive bids once an acquirer made a public offer under the relaxed rules.

It may relax rules if the government or a regulatory authority has removed the board of the target firm and appointed others to run it; the new directors have a plan that provides for transparent and competitive process for continued operation of the company in the interest of all stakeholders and does not favour a particular acquirer; the competitive process is reasonable and fair; the process provides for details on timing and completion of the public offer, and the manner in which the change of control would take place; the current rules are a likely impediment to the implementation of the plan of the target company; and the relaxation of provisions is in the interest of the public, investors and the securities market.

“I have not seen it in great detail, but it is a welcome move as it will help us move quickly. This at least defines some process,” said Kiran Karnik, chairman of the Satyam board.

Anoop Narayanan, partner with Mumbai-based corporate law firm Majmudar & Co, said the revised norms provided a mechanism for the board to solicit bids transparently and put the best one before Sebi. “Thereafter, Sebi can accept the bid and impose any condition it deems necessary,” he said.

The regulator said the amendment to the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, provided for "relaxation from the strict compliance of provisions of Chapter-III in certain cases".

Sebi, on an application made by a target company, can relax the provisions of Chapter-III, which deals with mandatory open offers if an entity acquires 15 per cent stake in a company, and also with acquisition or change of control.