Open Offer

In News: Gautam Adani-led Adani Group, a conglomerate with diverse business interests, acquired 29.18 per cent stake in television channel NDTV Ltd, and said it would launch an open offer as required by the Securities and Exchange Board of India (SEBI) to buy another 26 per cent in the company.

• The single-largest shareholder of NDTV, besides promoters Prannoy Roy and Radhika Roy (32.26%) and the Adani Group (29.18%), is Mauritius-registered foreign portfolio investor (FPI) LTS Investment Fund Ltd with a 9.75% stake.

About open offer:

• According to SEBI (Substantial Acquisition of Shares and Takeovers) Rules, an open offer is an offer made by the acquirer to the shareholders of the target company inviting them to tender their shares in the target company at a particular price.
• The primary purpose of an open offer is to provide an exit option to the shareholders of the target company on account of the change in control or substantial acquisition of shares, occurring in the target company.
• An open offer is triggered if an acquirer holds more than 25 per cent of the public shareholding in the company.
• The open offer price can be lower than the market price as per SEBI Rules.
• Open offer price for acquisition of shares under the minimum open offer shall be 1) the highest negotiated price under the share purchase agreement triggering the offer; 2) the volume-weighted average price of shares acquired by the acquirer during 52-weeks preceding the public announcement; 3) the highest price paid for any acquisition by the acquirer during 26 weeks immediately preceding the PA; and 4) the volume weighted average market price for sixty trading days preceding the PA.
• Significance: After the open offer, If the Adanis manage to get the required 26 per cent stake, the group’s total stake will go up to 55.18 per cent, enabling it to take management control of the target company (NDTV). The acquirer will be able to bring in their own key management persons.
• If the Adanis fail to get a 50 per cent stake, they have the option to buy shares from other institutional investors. The Adanis may have to raise the offer price to get the required majority.
• The Roys have the option to launch a counter offer to the open offer made by the Adanis at a higher price.

Source: Indian Express