SEBI allows stock exchange route for merger & acquisition deals

Our Bureau Mumbai | Updated on April 13, 2015

Also, buyback, competing offers can be effected via separate window

Come July 1, buybacks and share acquisitions through M&A deals can be conducted through a separate window on the stock exchanges, said a SEBI notification. Currently, exchanges offer a separate window for promoters or large investors to dilute their stakes through the offer-for-sale mechanism. Of late, the Centre has been using this route for divesting its stakes in PSU majors.

The use of the stock exchange mechanism for buyback or M&A would be in addition to the already existing tender offer method, SEBI said.

Acquirers can choose more than one stock exchange with nation-wide presence for the purpose but should choose only one as a designated exchange.

Regional SE listed too

Companies listed on regional stock exchanges are also eligible for buy-backs/M&A deals through stock exchanges.

Companies which face bids and counter bids from hostile companies can also use this mechanism.

For competing offers, each acquirer will have a separate window during the period when shares are tendered, besides the flexibility to choose the window of any exchange. Acquirers/ companies have to appoint a stock broker to transact on their behalf. Sellers of shares have to place their orders through their brokers during normal secondary market trading hours during the tendering period. These shares would then be transferred to a special account of the clearing corporation specifically created for this purpose.

Online info dissemination

Brokers will also provide details of shares tendered to the clearing corporation. Based on the number of shares transferred to the special account, information about the cumulative quantity tendered would be disseminated online during the trading session at periodic intervals. For a buy-back offer, the company has to provide a record date to determine the shareholders eligible to participate. Only such shareholders would be allowed to sell through the stock exchange mechanism. The clearing corporation would settle the trades by transferring shares from the special account to the escrow account of the company/acquirer.

Tendering of locked-in shares can be done by selling shareholders using the existing route, that is, off-market.

Published on April 13, 2015

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