Conditional Offer and Competing Offer

Regulation 19. Conditional Offer

19(1).

• An acquirer makes an open offer

• The acquirer is allowed to attach a condition to the offer

• This condition relates to a minimum level of acceptance

• Meaning:

  • the offer will proceed only if a specified minimum number/percentage of shares is tendered

• If the minimum level is achieved:

  • the offer becomes successful

• If the minimum level is not achieved:

  • the acquirer may not proceed with the offer

• The acquirer makes an open offer based on an agreement

• The offer may be subject to a minimum level of acceptance

• In such cases, the agreement must include a specific condition

• This condition must state that:

  • if the required level of acceptance is not achieved

  • then the acquirer will not acquire any shares under the open offer

  • and the underlying agreement itself will be cancelled (rescinded)

• Final takeaway:

  • in agreement-based offers, failure to meet minimum acceptance leads to no acquisition and automatic cancellation of the agreement

19(2).

• The acquirer makes an open offer with a minimum acceptance condition

• During the offer period, restrictions are imposed

• The acquirer and persons acting in concert cannot freely buy shares

• They are not allowed to acquire shares of the target company during this period

• There are only two exceptions:

  • acquisition through the open offer itself

  • acquisition under the underlying agreement that triggered the open offer

• No other market purchases are allowed

• Final takeaway:

  • when an offer is conditional on minimum acceptance, the acquirer must not buy shares outside the offer or agreement during the offer period

Regulation 20. Competing Offer

20(1).

• An acquirer makes a public announcement of an open offer

• After this, a detailed public statement is issued

• Another person (not the original acquirer) gets an opportunity

• Such person can make a competing open offer

• Time limit:

  • within 15 working days from the date of the detailed public statement of the first acquirer

• This allows competition between bidders

• Final takeaway:

  • competing offers are allowed, but must be made within 15 working days of the first detailed public statement

20(2).

• A competing open offer is made by another acquirer

• This offer must meet a minimum size requirement

• The competing acquirer must consider:

  • shares already held by him

  • shares held by persons acting in concert (PAC)

• These, together with shares proposed to be acquired, must be at least equal to:

  • the total holding of the first acquirer

• The first acquirer’s holding includes:

  • shares already held

  • shares proposed to be acquired under the open offer

  • shares under any underlying agreement

• So, the competing offer cannot be smaller than the first offer

• Final takeaway:

  • a competing offer must be at least equal in size to the first acquirer’s total intended holding

20(3).

• A second (competing) open offer is made within the 15 working day period

• Normally, some open offers may be treated as voluntary open offers under regulation 6

• But this provision overrides that

• It states that such a competing offer:

  • will not be treated as a voluntary open offer

• Instead:

  • it will be treated as a competing offer

• Accordingly:

  • the relevant provisions for competing offers will apply

• Final takeaway:

  • a timely competing offer is not voluntary, and is governed by special rules for competing offers

20(4).

• One acquirer makes the first open offer

• Another person makes an open offer within the allowed time

• Both offers are treated in a special category

• The law considers:

  • the first open offer, and

  • the subsequent open offer(s)

• All of them are treated as competing offers

• This means:

  • the same rules for competing offers apply to all

• Final takeaway:

  • once a competing offer arises, all offers (including the first one) are treated as competing offers

20(5).

• A first open offer is announced

• There is a 15 working day window for making a competing offer

• After this 15-day period ends:

  • no new open offers can be announced

• Also, no person can enter into any transaction that would trigger an open offer obligation

• This restriction continues:

  • until the entire offer period is over

• So, there is a freeze period after the initial window

• Final takeaway:

  • new offers or triggering transactions are not allowed after 15 days until the offer period ends, ensuring stability in the process

20(6).

• There is a first open offer made by an acquirer

• There may also be competing offers

• Normally, competing offers cannot be conditional on a minimum level of acceptance

• This means:

  • competing acquirers must proceed unconditionally

• Exception:

  • if the first open offer itself is conditional on minimum acceptance

• In that case:

  • competing offers may also be made conditional

• Final takeaway:

  • competing offers are generally not allowed to have minimum acceptance conditions, unless the first offer already has such a condition

20(7).

• Normally, competing offers are allowed within a limited time window

• But this provision creates a complete restriction in certain cases

• In these cases, no person can:

  • make a new open offer, or

  • enter into any transaction that would trigger an open offer

• This restriction applies until the entire offer period ends

• It applies where:

  • (a)

    • the open offer is due to disinvestment

    • under regulation 13(2)(d)

  • (b)

    • the open offer is made after relaxation granted by the Securities and Exchange Board of India

    • from strict compliance with Chapter III or IV (under regulation 11(2))

• Final takeaway:

  • in disinvestment or SEBI-relaxed cases, no competing offers or triggering transactions are allowed at all during the offer period

20(8).

• There may be multiple competing open offers

• All such offers must follow the same schedule of activities

• The tendering period timelines must be identical for all competing offers

• If a new competing offer is made later:

  • the timelines are aligned accordingly

• The last date for tendering shares is adjusted

• Final rule:

  • the last date will be the last date of the latest (last made) competing offer

• This applies to all competing offers (including the first one)

• Final takeaway:

  • all competing offers run on a common timeline, and the tendering deadline is extended to match the latest competing offer

20(9).

• There are multiple competing open offers

• A new competing offer is publicly announced

• An earlier acquirer (who already made a competing offer) gets a right

• He can revise the terms of his open offer

• But this revision is subject to a condition:

  • the revised terms must be more favourable to shareholders

• This could include:

  • higher price

  • better terms

• Final takeaway:

  • earlier bidders can improve their offer, but only in a way that benefits shareholders

• There are competing open offers

• Acquirers making these offers are allowed to revise the offer price upward

• This right is available to all competing acquirers

• However, there is a strict time limit

• Upward revision can be made:

  • any time up to one working day before the commencement of the tendering period

• After this deadline:

  • no further increase in price is allowed

• Final takeaway:

  • competing bidders can keep improving their price, but only until one working day before tendering begins

20(10).

• This provision deals with competing open offers

• It clarifies the overall applicability of the regulations

• General rule:

  • all provisions of the regulations apply to competing offers

• Exception:

  • only those specific variations/modifications provided under this regulation will differ

• So, apart from these limited differences:

  • competing offers are governed in the same way as normal open offers

• Final takeaway:

  • competing offers follow the same regulatory framework, except for specific changes allowed under this regulation