The Hindu Business Line : Oracle's open offer for i-flex: Regulatory angle

The open offer announcement by Oracle Global (Mauritius) enhancing the offer size (apart from the offer price) from 20 per cent to 34.14 per cent falls within the regulations spelt out in the SEBI Takeover Code. If the open offer is successful, Oracle's equity stake in i-flex Solutions will increase from 55.07 per cent to 89.21 per cent, a shade below the 90 per cent delisting threshold.

However, those familiar with the SEBI Takeover Code may wonder how Oracle is crossing the 75 per cent threshold without attracting the Delisting guidelines? These guidelines mandate price discovery by shareholders using a reverse book building process once the promoter holding in companies crosses 75 per cent. The recent case in point is the delisting offer by DHL Singapore for Blue Dart.

Oracle's latest open offer does not run counter to the Takeover Code as it fulfils two key elements. One, the relevant provision (Regulation 11 (2A)) of the Takeover Code states that where an acquirer (Oracle, in this case) holds 55 per cent or more but less than 75 per cent of the shares in the target company (in i-flex) wants to consolidate his holding, he can do so only through a public announcement. And the public announcement is what Oracle has currently made for i-flex.

Two, the acquirer will be exempt from making a delisting offer if the public shareholding of the target company does not fall below the minimum level permitted by the Listing Agreement. According to the managers to the offer, DSP Merrill Lynch, the minimum public shareholding level prescribed in the Listing agreement (for continuous listing) is 10 per cent (or promoters holding of 90 per cent), instead of 25 per cent applicable in most cases.

Hence, Oracle is making an offer that will take its equity stake in i-flex to a shade below 90 per cent.

More Stories on : Software | Stocks | Open Offers

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page