The Securities and Exchange Board of India has absolved Tata Sons from an open offer obligation in the case of Trent. Trent is a Tata group company in the business of retail.
Tata Sons had applied for exemption on July 23 which was referred to SEBI’s panel of experts.
The panel did not find any convincing reason for insisting on the acquirer (Tata Sons) to make an open offer when the acquirer along with persons acting in concert was not required to make an open offer on account of the creeping acquisition question.
The panel observed that Tata Sons’ 25.16 per cent stake in Trent (prior to a qualified institutional placement on March 16) reduced to 23.08 per cent on account of widening of equity base though the company did not sell any shares.
This increased to 23.71 per cent when Cumulative Compulsorily Convertible Preference Shares (CCPS) were converted into equity and finally to 26.86 per cent post-preferential allotment.
The panel observed that the preferential allotment would not result in any change in control of management of Trent and also not adversely affect public shareholders.
The panel also observed that the preferential issue of 4.29 per cent to the promoter group would not trigger an open offer for them as a whole as the group’s shareholding was already above 25 per cent and the allotment was within the creeping acquisition limit of five per cent.
The panel recommended that the breach of the 25 per cent threshold limit again on account of creeping acquisition by Tata Sons appeared to be inconsequential. Viewing the requirement to make open offer as merely technical, the panel recommended exemption.