Fresh Twist To Ge Capital Bid For Srf Finance

GE Capitals proposed takeover of the Arun Bharat Ram-controlled SRF Finance has taken an interesting turn. The Securities and Exchange Board of India has already given its observations to the acquirer on the basis of a letter of offer seeking to pick up 100 per cent of SRF Finance's equity.

This means if GE Caps is to restrict the offer to 85 per cent, as it intends to, it would have to move Sebi again, since that would mean making a key change in the terms of the offer itself.

The other crucial contradiction pertaining to the GE Capital-SRFF issue is that the Foreign Investment Promotion Board (FIPB) has allowed GE Caps to acquire up to 90 per cent in the company. This, however, attracts another takeover code provision: if a company acquires 90 per cent of the stakeholding of another company, it would have to make a fresh offer to the remaining 10 per cent stakeholders.

 

The 21-day period, within which Sebi is required to make its observations, is also over, which means the filing process is complete. Top Sebi sources said Sebi had recorded its observations in line with the new takeover regulations on the basis of a 100 per cent buyout. Under the new code, the regulator no longer vets letters of offer, but merely records its observations.

Sources said one possibility could be to make an open offer for 100 per cent. If the market response is not to the fullest extent, and the stake which GE Caps gets is less than 90 per cent, there is no problem, since it meets both the Sebi and the FIPB requirements.

If, to be on the safer side, GE Caps makes an offer for only a maximum of 85 per cent, it would have to make changes in the terms of offer, and therefore approach Sebi again. The entire issue is a function of market response, sources said.

GE Caps has agreed to come down from a 100 per cent buyout following the finance ministry's objections on the issue.

Conducting the acquisition under the new takeover regulations means it will now be necessary for GE Caps to conform to the requirement of opening an escrow account and depositing a percentage of the total offer as escrow deposit.

Sebi sources said GE Caps had earlier sought to make a 20 per cent public offer, but later decided to raise it to 100 per cent. The stock markets regulator was consulted by the company, which was then told that the offer would need to be made according to the new Sebi takeover regulations, notified recently.

The GE Caps takeover of SRF Finance has become an important issue of late, after the US major decided it wanted 100 per cent of the company. Thereafter, the finance ministry is reported to have expressed some reservations in allowing a 100 per cent takeover, since it was in the financial sector.

GE Caps has signed a memorandum of understanding with the Arun Bharat Ram-controlled SRF to pick up 55.5 per cent in SRF Finance, at Rs 53.50 per share.