AstraZeneca delisting process under SEBI lens

Our Bureau Mumbai | Updated on March 13, 2018 Published on June 25, 2014

An image of SEBI headquarters   -  BL

Market regulator tells BSE and NSE to closely monitor and report any aberrations

The delisting process of pharma major AstraZeneca has come under market regulator SEBI’s lens for violation of its regulations on fraudulent and unfair trade practices.

In a late night order on Tuesday which came into effect immediately, SEBI directed the BSE and the NSE to “closely monitor the entire delisting process of AstraZeneca Pharma and allow the final delisting of its shares only after satisfying themselves that the process has been fair and transparent.”

Exchanges have been asked to promptly report aberrations in the delisting process.

SEBI further directed that the promoters of Astrazeneca shall finally purchase shares from public shareholders in the delisting offer only after seeking approval of the BSE and the NSE.

Was OFS a way to get shares delisted?

SEBI said that it started investigating the matter after coming across reports that the offer-for-sale (OFS) done by Astra Zeneca’s promoters in May 2013 was a deliberate attempt to subsequently get the share delisted at ease.

On further examination, SEBI found that Astra Zeneca’s two earlier attempts at delisting (2004 and 2010) had been unsuccessful.

SEBI found that 94.02 per cent of shares offered through the OFS were allocated to four entities which were sub-accounts and participatory notes of a SEBI registered FII- Elliott Advisors (HK) Ltd.

Elliott group's role

This raised a suspicion that the Elliott group might be working in collaboration/concert with Astra Zeneca’s promoters to facilitate the delisting.

SEBI observed that the seller broker ICICI Securities had carried out more than 60 road shows with prospective investors ahead of the OFS and the OFS floor price was at significant discount to prevailing market price; still only Elliott group was allocated 94.02 per cent of shares offered.

The floor price was kept at Rs 490 per share far below the previous day's closing price of Rs 805.3. This made the bids in the OFS, (which was 2.84 times oversubscribed) hover around this price only.

This facilitated the Elliott group to mop up almost all the shares (i.e. 94.02 per cent) offered in OFS at an average price of Rs 625.35 which was lower than previous day's close by Rs 179.95; but was significantly above the floor price and the then prevailing indicative price.

SEBI found that the Elliott group had bid in the OFS in a synchronised manner through six FIIs/sub-account and the final bid modifications were made a few seconds ahead of the market closing.

Moreover, the Elliott group had no previous exposure to the Astra Zeneca Scrip and that the present de-listing offer of Astra Zeneca had been made within one year of OFS.

SEBI said that the present delisting offer would not have been through without favourable voting by Elliott group.

With or without retail investors

The Elliott group and the participating FIIs, with their current shareholding at 15.52 per cent were in a position to ensure that the delisting process goes through even if none of retail investors offer their shares.

In addition, SEBI noted that by virtue of their 15.52 per cent shareholding as against the 8.89 per cent shareholding of retail investors, had the potential to influence the delisting price in a manner that could be detrimental to the interest of retail shareholders.

SEBI is examining the matter further and if the suspected concerted/co-ordinated action of AstraZeneca and Elliott group is found true, they would be guilty of violating SEBI’s regulations on fraudulent and unfair trade practices.

Published on June 25, 2014
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