Financial Daily from THE HINDU group of publications
Tuesday, Oct 29, 2002
Financial Daily from THE HINDU group of publications Tuesday, Oct 29, 2002 |
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Corporate
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Mergers & Acquisitions Markets - Regulatory Bodies & Rulings SEBI `overlooked' alliance issue in ACC deal Our Bureau
MUMBAI, Oct. 28 THE Securities and Exchange Board of India (SEBI) had overlooked, among others, two obvious and crucial pieces of information while investigating whether Gujarat Ambuja Cements Ltd (GACL) had gained control of Associated Cement Companies Ltd (ACC). The Securities Appellate Tribunal (SAT), while asking SEBI to re-investigate the sale of 14.5 per cent promoters' equity in ACC by the Tatas to the Ambujas, said the regulator had not sufficiently probed the claim that GACL and ACC had entered into a "strategic alliance". While "it is true that strategic alliance need not necessarily be one affecting the control, if any, over a company", it is to be noted that the "Ambujas and ACC are known competitors in the cement market. A strategic alliance between two cement majors which were hitherto competitors is a major development," Mr C. Achuthan, Presiding Officer, SAT, said in his order. Legal experts said if SEBI were to find that the strategic alliance indeed altered the control in the company, it may help set a precedent to open cases where a stake sale has been defined as strategic investment or alliance without change in management control. Mr Achuthan said the alliance "could not operate in a vacuum and the understanding is normally documented. If the Ambujas and the Tatas had reached a strategic alliance involving GACL and ACC, it would show that the parties had decisive control in the companies concerned''. The second bit of information that SEBI overlooked without giving adequate consideration, according to SAT, is that IDBI Capital Markets Ltd, the capital market arm of Industrial Development Bank of India (IDBI), had, in a note to its parent expressed a prima facie view that the transaction attracted Regulation 12 of SEBI Takeover rules. Mr Achuthan said it "would have been useful to find out" from IDBI, a member on the boards of both GACL and ACC, the basis on which its subsidiary had taken the view. IDBI's view is not a layman's view; it has enough expertise in the area, he said.
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