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Sunday, July 22, 2001













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Draft offer document

Does SEBI ``approve'' the draft offer document? What happens thereafter?

SEBI does not approve or vet the draft offer document. SEBI's role is to ensure that the disclosures made in the offer document are generally adequate to enable the shareholders make an informed decision regarding the offer. SEBI only conveys its comments, if any, on the draft offer document to the Merchant Banker which may result in certain disclosures to be made in the offer document before it is despatched to the shareholders. SEBI is, however, under no obligation to send any comments on draft offer document.

The merchant banker (MB) -- the registered intermediary -- is expected to ensure that the offer document contains all the relevant and accurate information.

What is offer document and how would shareholders know the disclosures contained therein?

The acquirer through the MB sends the offer document and the blank acceptance form within 45 days from the date of PA, to all the shareholders whose names appear in the register of the company on a particular date (mentioned as specified date in PA). The offer remains open for 30 days.

The shareholders are required to send their Share certificate(s)/related documents to the registrar or the MB as specified in PA and in offer document. The acquirer is required to pay consideration to all those shareholders whose shares are accepted under the offer, within 30 days from the closure of offer.

In their own interest, the shareholders are advised to send such documents as registered post. The shareholders may also note that under no circumstances such documents should be sent to the acquirer.

How is the price determined in an open offer? Does SEBI approve the price?

SEBI does not approve the offer price but ensures that all the relevant parameters are taken in to consideration for fixing the offer price and that justification of the same is disclosed in the offer document. The relevant parameters are :

*Negotiated price under the agreement which triggered the open offer.

*Highest price paid by acquirer or persons acting in concert with him for any acquisitions, including by way of allotment in public or rights issue during the 26-week period prior to the date of the P.A.

*Price paid by Acquirer under a Preferential Allotment made to him or to persons acting in concert at any time during the 12 months period up to date of closure of offer.

*Average of weekly high and low of the closing prices of shares as quoted on the Stock exchanges, where the target company's shares are most frequently traded during 26 weeks prior to the date of the Public Announcement.

In case the target company's shares are not frequently traded (definition of this term is given in regulations), then instead of the fourth point above, parameters based on the company's fundamentals such as return on networth, book value per share, EPS etc. are also required to be considered and disclosed.

Are only those shareholders whose names appear in the register of target company on a specified date, are eligible to tender their shares in the open offer?

No, even the target company's shareholders whose names do not appear in the register on the specified date, but are holding the target shares anytime during the offer period, are entitled to participate in the offer in accordance with the procedure laid down for them in Public Announcement/Offer Document.

(SEBI Guide)


Section  : Personal Finance
Previous : Option Basics -- IX
Next     : Rationale for risk weights

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