sebi:CO/296/TO/10/2002

SEBI · SEBI · 1998-12-14 · G.N. Bajpai, Chairman, Securities and Exchange Board of India

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Application for exemption from making public announcement/open offer rejected; Acquirer directed to make public announcement under Chapter III taking 3.5.2002 as reference date within 45 days and pay interest @10% per annum from 31.8.2002 till actual payment.

Regulations

• Reg. 4
• Reg. 11
• Reg. 16
• Reg. 10
• Reg. 12
• Reg. 14
• Reg. 14(1)
• Reg. 14(3)
• Reg. 2(1)(b)
• Reg. 22
• Reg. 27
• Reg. 22(8)
• Reg. 20

Parties

• Kennametal (Acquirer)

Holding

The Acquirer's application for exemption from making an open offer for Widia (India) Limited is rejected, and the Acquirer is directed to make a public announcement under Chapter III taking 3.5.2002 as reference date within 45 days with 10% per annum interest from 31.8.2002 till payment.

Full text

6.3The following is the list of the material consents of, or registrations, declarations or filings with, or expirations, of waiting periods imposed by, any governmental entity necessary for the consummation of the acquisition and their status : (i)Approval of the German Federal Cartel Office of the Federal Republic of Germany – approval has been obtained.  (ii)Exemption from the Spanish Competition Authority – exemption has been obtained.  (iii)Approval of the Office for Protection of Economic Competition of the CzechRepublic – application for this approval has been filed and approval is awaited.  (iv)Approval of the Department for Protection and Economic Defence within the Ministry of Justice of Brazil – application for this approval has been filed and approval is awaited.  (v)Application to the Foreign Investment Promotion Board ("FIPB") regarding the acquisition of shares of the Target company by the Acquirer through a public offer. The Acquirer has not applied to the FIPB for this approval for reasons stated hereinafter.  6.4Under the proposed acquisition, the Acquirer would indirectly acquire 11,208,840 Series A equity shares and 5,644,920 Series B equity shares of the Target Company. All the equity shares have uniform voting rights attached thereto.  6.5The Acquirer be granted exemption from making open offer to the shareholders of the Target company on the following grounds :- (i)The Acquirer will be unable to obtain the requisite approval from the Foreign Investment

for the Acquirer to make a public offer for the Target company shares because the Acquirer would eventually be forced to withdraw the public offer since the requisite FIPB approval would not be granted. (iii)Making such a public offer would also create unfair expectations in the market. The public announcement would raise expectations of the public shareholders of the Target company. In addition, the public offer would result in artificial manipulation of the market, which can be harmful to the investors, since the public offer would have to be withdrawn at a later date due to non-consideration of the application by the FIPB. (iv)In the event that this exemption is not granted, the Acquirer would have to make a public offer for the Target companyIndia shares, thereby creating an artificial expectation amongst the investors in the market. Thereafter, FIPB is bound to reject the Acquirer’s incomplete application for lack of a NOC, and this would force the Acquirer to withdraw the public offer. Thus, to avoid any such market manipulation and to save the resources of both the Acquirer and SEBI, the Acquirer seeks exemption from making a public offer under the provisions of the Takeover Code. 7.0.The said application dated July 12, 2002 was forwarded to the Takeover Panel on 07.08. 2002 in terms of sub-regulation(4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated July 26, 2002 has recommended, inter alia, as under: "On the overall consideration of the

announcement with respect to the agreement on the same day as well. This global announcement was conditional upon a number of conditions precedent, which included governmental approvals in various countries, as set forth in the exemption application, various corporate and holding re-organizations in different countries, including the transfer of the Target company shares form the Indian promoter to the Foreign promoter and the termination of all agreements, arrangements and disputes between the two promoters. All these conditions were fulfilled on or around August 30, 2002. As such, both the global announcement and the actual change of control of the Target company took place prior to the enforcement of the Amended Code.  In the present case, the Acquirer did, prior to the notification of the Amended Code and in reliance upon the provisions of the old Takeover Code, apply to SEBI on July 12, 2002, seeking an exemption from making a public announcement and an open offer. The Acquirer applied to the FIPB seeking approval to purchase additional shares of the Target company, prior to the notification of the Amended Code. It acquired the right to calculate the minimum price according to the provisions of the old regulation 20. The Acquirer relied upon the provisions of the old regulation 20 of the Takeover Code to calculate its liability with respect to the minimum offer price at which an open offer had to be made. On these facts, the present transaction is governed by the provisi

Source: SecMarx — sebi:CO/296/TO/10/2002. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.