sebi:8298

SEBI · SEBI · 2007-02-12 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Exemption granted from Regulations 10 and 12 of the Takeover Regulations for the proposed indirect acquisition

Provisions invoked

• s. 19

Regulations

• Reg. 4
• Reg. 10
• Reg. 5
• Reg. 4(2)
• Reg. 3(4)

Holding

SEBI granted Arvind Brands Ltd. exemption from complying with Regulations 10 and 12 of the Takeover Regulations in respect of the indirect acquisition of shares of Arvind Products Ltd. pursuant to its proposed acquisition of 49% equity shares of Asman Investments Ltd. from Arvind Mills Ltd. The acquirer was required to complete the transaction within 30 days and file a compliance report with SEBI.

Full text

1.0 BACKGROUND 1.1 Arvind Brands Ltd. (hereinafter referred to as ‘the acquirer) is a public limited company incorporated under the Companies Act, 1956, having its registered office at Arvind Mills Premises, Naroda Road, Ahmedabad - 380 025. The acquirer and Asman Investments Ltd. are 100% subsidiary of Arvind Mills Ltd. The said Asman Investments Ltd. is holding 50.13% equity shares of Arvind Products Ltd. (hereinafter referred to as the target company). 1.2 The equity shares of the target company are listed at Bombay Stock Exchange Ltd., Delhi Stock Exchange Association Ltd., Ahmedabad Stock Exchange Ltd., Calcutta Stock Exchange Association and Bangalore Stock Exchange Ltd. The acquirer proposes to acquire 39,200 equity shares of Asman Investments Ltd. from Arvind Mills Ltd., the parent company. The said 39,200 equity shares accounted for 49% of the said Asman Investments Ltd. Pursuant to the proposed transaction, the holding of Arvind Mills Ltd. in Asman Investments Ltd. would reduce from 100% to 51%. 1.3 The proposed acquisition of 49% equity shares of Asman Investments Ltd., by the acquirer from Arvind Mills Ltd. would lead to the indirect acquisition of shares of the target company, which would trigger the provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as ‘the Takeover Regulations’). 2.0 APPLICATION FOR EXEMPTION 2.1 The acquirer vide letter dated February 12, 2007 filed a

a. All the companies viz. The Arvind Mills Ltd., Asman Investments Ltd., the acquirer and the target company are part of Lalbhai Group. b. The acquirer does not hold any shares directly in the target company. c. For strategic reasons and particularly with a view to focus on the core business activity i.e. manufacturing and selling garments, it has been decided by the management of Arvind Mills Ltd. to divest its investment portfolio in such a manner that the ultimate control remains/ preserved with it. d. There will be no change in the ultimate ownership or control over the Target company. e. Since the group companies have been exercising control over the target company, it would not affect the interests of the public shareholders of the target company. f. The proposed acquisition is an internal arrangement amongst the promoters of the target company. The proposed acquisition is for the purpose of consolidation of the shareholding of the target company in the specific promoter group company. The acquirer further submitted that, even though as a result of the proposed acquisition there would be no change in the management and control of the target company and in its status, as the acquirer continued to be promoters of the target company, technically it might be possible to construe that there would be indirect acquisition. Accordingly the application is made.

g. The share market value of the target company is not going to be affected by the proposed acquisition. The proposed acquisition would not cause any loss or prejudice to any of the shareholders of the target company. h. In view of the growing economy, the group has initiated the process of creating a separate investment vehicle as a part of larger group investment policy to make and park certain investments in the acquirer to derive cost effective, tax efficient and better administration structure. As a part of this, Arvind Mills Ltd. proposed to transfer part of the investments held in Asman Investments Ltd. to the acquirer, its wholly owned subsidiary without effecting any kind of change of control of two listed subsidiary companies. 3.0 RECOMMENDATION OF THE TAKEOVER PANEL 3.1 The aforesaid application dated February 12, 2007 was forwarded to the Takeover Panel by SEBI in terms of sub-regulation (4) of regulation 4 of the Takeover Regulations. The Takeover Panel, vide report dated March 6, 2007 (forwarded to SEBI vide letter dated March 20, 2007) has recommended as under – “The acquirers would be acquiring indirectly shares/voting rights and control over Arvind Products Ltd. All the companies Arvind Mills Ltd., Asman Investments Ltd. including Arvind Brands Ltd are part of one group (Lalbhai Group). The control over the target company will not affect adversely the interest of shareholders in general of the target company as the promoters of the target company along with o

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