Bid To Tighten Creeping Takeover Rule

The committee is expected to meet in Mumbai next week to finalise the code.

Sources said the changes suggested in the "creeping" takeover clause was to make it mandatory for a corporate raider holding between 25 and 50 per cent stake to make a public offer to consolidate his stake.

Under the provisions in the draft takeover code, an acquirer with a 25-50 per cent holding can pick up upto 5 per cent of the company's share from the market without having to make a simultaneous public offer.

The participants also felt that the rights route should be allowed as a means of acquisition, subject to the condition that any collusion between the promoter and the acquirer in his effort to increase his stake, should imply a violation of the takeover code.

 

Among others, the meeting was attended by Sebi chairman D R Mehta and the department of company affairs additional secretary B B Tandon.

Mehta said the points raised at the meeting would be conveyed to the Bhagwati committee.

"The committee will take up these points for discussions and see which of them can be incorporated in the final takeover code," he said. The issue of raising the trigger point for a mandatory public offer from the proposed equity stake level of 10 per cent was also discussed.

A section of the officials felt that the limit should be raised from the existing limit which was set in 1994, but others felt that there was no need for this.

The participants also discussed whether the provision for a minimum offer of 20 per cent was adequate. It was felt that in certain countries, an acquirer has to make an offer for 100 per cent of a company's stake.

Officials were, however, reminded that this may not be feasible in the Indian conditions where there are no leveraged buyouts with the assistance of loans from financial institutions and banks.