The open offer for minority shareholders would need to be made even if the ‘control’ has been acquired without crossing the threshold shareholding limit, SEBI said

Amid a continuing stalemate over a proposed buyout of 24 per cent stake in Jet Airways by Abu Dhabi carrier Etihad, SEBI on Tuesday said any entity acquiring control of a listed Indian company would need to make an open offer for public shareholders.

The open offer for minority shareholders would need to be made even if the ‘control’ has been acquired without crossing the threshold shareholding limit (25 per cent), SEBI Chairman U. K. Sinha said.

While Mr. Sinha refused to comment specifically on the issues surrounding Jet-Etihad deal, he said that SEBI’s position is very clear about any deals involving substantial acquisition of shares and takeovers. “I am not talking about any specific deal, but SEBI is very clear on such issues. If somebody has acquired stake in a company beyond a certain threshold then the acquirer has to make an open offer to others. That is the first position.

“The second position is that even if the acquirer has got less than the threshold but he has got the control over the company then also he has to make an open offer. So SEBI will be looking into any case where there is a suspicion or belief that control has been acquired. SEBI will apply its tests and take a decision accordingly,” he said.

As per SEBI’s takover regulations, any entity acquiring a 25 per cent or more stakes in a listed company needs to make a mandatory open offer for purchase of additional 26 per cent shares from the public shareholders. However, the open offer obligations also apply to the entities acquiring ‘control’ of a listed company with a stake less than this threshold limit of 25 per cent.

SEBI rules define ‘control’ as “the right to appoint majority of directors, or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner”.

As per the proposed deal between Jet and Etihad, the Abu Dhabi carrier is acquiring 24 per cent stake in the Indian airline company, which is below the threshold limit of 25 per cent. However, there have been concerns that Etihad was getting voting rights and other powers in excess of those equivalent to its proposed 24 per cent stake.

Jet has, however, been saying that it would comply with all relevant regulations on this deal and there have been talks that the deal could be re-structured to meet the norms.

As per the deal, Etihad would hold 24 per cent stake, while Jet Chairman Naresh Goyal would have 51 per cent and the remainder 25 per cent would be with public shareholders.

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