sebi:WTMO/TCN/15/CFD/JUNE/08

SEBI · SEBI · 2006-10-28 · T. C. Nair, Whole Time Member

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

Facts / Headnote

Exemption granted

Provisions invoked

• s. 19

Regulations

• Reg. 4
• Reg. 11
• Reg. 3
• Reg. 2
• Reg. 5
• Reg. 11(2)
• Reg. 20
• Reg. 20(5)
• Reg. 3(1)(l)

Holding

SEBI granted the acquirer exemption from making a public offer under regulation 11(2) of the Takeover Regulations for the increase in voting rights from 65.14% to 68.94% consequent to the target company's proposed buy-back.

Full text

2 2.2 Since, depending upon the response of the shareholders of the target company, post buy-back shareholding of acquirer may increase to a level beyond 65.14%, the acquirer have sought exemption under regulation 3(1)(l) from the applicability of regulation 11 of the Takeover Regulations. 2.3 In the said application, among others, the following submissions have been made:- a. The target company has issued, subscribed and paid-up share capital of Rs. 14,47,27,400/- consisting of 1,44,72,740 fully paid-up equity shares of Rs. 10 each having uniform voting rights. The target company does not have any preference share capital. There are no partly paid-up or locked-in or non-transferable shares or any other outstanding instruments convertible into shares. The shares of the target company are frequently traded in terms of explanation (i) to regulation 20(5) of the Takeover Regulations. b. Prior to the proposed buy-back, the target company had made buy-back offer in February 2003 and in March 2007. c. In March 2001, Abbott acquired the worldwide pharmaceuticals business of BASF AG, and in doing so indirectly acquired 51% equity shareholding in the target company, through the acquirer (erstwhile Lupharma UK Holding One Limited). Following the acquisition of 51% shareholding in the target company by Abbott, Abbott Equity Holdings Limited and Abbott Laboratories made an open offer for acquisition of an additional 20% of the voting equity share capital of the target company in accordan

3 e. In March 2007, the target company carried out a buy-back of 8,07,360 shares at a price of Rs. 650/- per share. With regard to this buy-back offer, the target company and the acquirer, through the merchant banker, had made an application to SEBI vide application dated October 28, 2006 under regulation 4 of the Takeover Regulations. The exemption sought vide the aforementioned application had been granted by SEBI vide order number WTM/GA/128/CFD/1/07 dated January 24, 2007. Pursuant to this buy-back the shareholding of the acquirer in the target company increased from 61.7% to 65.14%. f. As on the date of application, the acquirer holds 94,28,184 fully paid equity shares of Rs. 10 each in the target company, which represents 65.14% of the total shareholding of the target company. g. Pursuant to the proposed buy-back the total paid up equity share capital of the target company would reduce from Rs. 14,47,27,400/- to Rs. 1,368 lacs and the acquirer shareholding in the target company would increase from 65.14% to voting rights 68.94%. h. Except for the above, there have been no applications previously made to SEBI under regulation 3 of the Takeover Regulations either by the target company or the acquirer. 2.4 The minimum offer price of the shares of the target company in accordance with regulation 20 of the Takeover Regulations, as on the date of the application, is Rs. 567.34. The shares are proposed to be bought back at a price not exceeding Rs. 650/- per share. 2.5 The max

4 liquidity. The buy-back is expected to contribute to the overall enhancement of the shareholders value resulting in an increase in the return on equity of the target company. 2.7 The shares proposed to be bought back constitute 5.83% of the total number of shares of the target company. 2.8 As the acquirer shall not tender any share held by it in the target company in the proposed buy-back, in case of a 100% response to the buy-back offer, the shareholding pattern of the target company before and after the proposed acquisition would be as under: Particulars Number of registered shareholde rs as on the date of the application Number of Shares before buy-back % to existing share capita/total voting rights No. of Shares post Buy-back % holding/total voting rights post Buy-back Promoter Group 1 94,28,184 65.14% 94,28,184 68.94% Directors of the Promoters - - -- - - Persons who are in control - - -- - - Foreign Investors (GDRs/ OCBs/FIIs/NRIs/N on-residents) 128 1,18,572 0.82% Indian Financial Institutions/ Banks/Mutual Funds/Govt. Companies 17 13,45,628 9.30% Public including other Bodies Corporate 14,284 35,80,356 24.74% 42,47,056 31.06% Total 14,430 1,44,72,740 100.00% 1,36,75,240 100.00%

Source: SecMarx — sebi:WTMO/TCN/15/CFD/JUNE/08. 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.