Conditional Offer and Competing Offer
Regulation 19. Conditional Offer
19(1).
When 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
The acquirer can add a condition that 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.
When 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And the underlying agreement itself will be cancelled (rescinded).
So , 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.
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.
Therafter , another person (not the original acquirer) gets an opportunity to make a competing open offer.
This competing offer must be made within 15 working days from the date of the detailed public statement of the first acquirer.
This allows competition between bidders.
So , competing offers are allowed, but must be made within 15 working days of the first detailed public statement.
20(2).
When 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.
A competing offer must be at least equal in size to the first acquirer’s total intended holding.
Example:
Acquirer A announces an open offer for a target company.
He already holds 15% shares.
He has an underlying agreement (SPA) to acquire 9%.
He proposes to acquire 26% through the open offer.
His total intended holding becomes 15% + 9% + 26% = 50%
The Valid Competing Offer
Acquirer B makes a competing open offer.
B already holds 10% shares.
Persons acting in concert (PAC) with B hold 5%.
B must ensure that: Existing holding + PAC holding + proposed acquisition ≥ 50%.
B proposes to acquire 35% through the competing open offer.
His total becomes: 10% + 5% + 35% = 50%
The competing offer is valid because it matches A’s total intended holding.
If B had proposed to acquire only 30%: Total = 10% + 5% + 30% = 45%
This would be less than 50%, so the competing offer would be invalid.
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).
When a acquirer makes the first open offer and another person makes an open offer within the allowed time then:
Both offers are treated in a special category.
The law considers the first open offer, and the subsequent open offer(s) and both these offers will be 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).
When a first open offer is announced L 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).
When the original (first) open offer is conditional upon receiving a minimum level of acceptances from shareholders.
Then a competing acquirer is allowed to also make their offer conditional on minimum acceptances.
However, if the first open offer is NOT conditional (i.e., it does not require any minimum acceptance level):
Then any competing offer must be unconditional.
The competing acquirer cannot introduce a minimum acceptance 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 SEBI from strict compliance with Chapter III or IV (under regulation 11(2)).
So m in disinvestment or SEBI-relaxed cases, no competing offers or triggering transactions are allowed at all during the offer period.
20(8).
When there are multiple competing open offers, all of them must follow the same schedule of activities.
This means: The tendering period (time given to shareholders to accept the offer) must be identical for all competing offers.
Now, consider the situation where a new competing offer is made later than the others:
The timelines are not kept different.
Instead, they are aligned (synchronized).
As a result:
The last date for tendering shares in all earlier offers is extended/revised.
It is brought in line with the last date of the latest competing offer.
Example:
Acquirer A makes the first open offer and sets a schedule of activities.
This schedule includes key dates like:
Opening of the tendering period.
Closing of the tendering period.
Now, Acquirer B comes in later with a competing open offer.
If each offer had different timelines, shareholders would get confused or be treated unfairly.
So, the law steps in and aligns everything.
All competing offers must now follow identical timelines.
This means:
Same opening date.
Same closing date.
Same overall schedule.
Suppose B’s offer is announced after A’s offer.
Because B came later, his timeline would naturally extend further.
To ensure fairness, the timelines of all offers (including A’s) are revised and stretched to match B’s timeline.
As a result: the last date for tendering shares in A’s offer is extended it is aligned with the last date of the last competing offer made.
20(9).
When a competing open offer is publicly announced by another acquirer
The earlier / original acquirer (the one who had already made a competing offer before this new one) is given a right to revise (change) the terms of his open offer.
However, this right is not unrestricted: The revision is allowed only if it benefits the shareholders of the target company.
In other words:
The revised terms must be more favourable than the earlier terms.
For example:
Higher offer price
Better consideration
More flexible conditions
If the revision is not more favourable , it cannot be made.
The Cur-Off Point for Revision
All acquirers making competing offers are given a flexibility to revise the offer price.
However, this flexibility is only for upward revision:
They can increase the offer price.
They cannot reduce the offer price.
This revision can be made at any time, but only up to a specific deadline.
The cut-off point is: One working day before the commencement of the tendering period
Once this point is crossed:
No further price revisions are allowed.
The offer price becomes final for shareholders.
20(10).
Every competing open offer must follow all the provisions of the takeover regulations.
So , the same rules on disclosures, timelines, pricing, procedure, obligations, etc. apply to competing offers as well.
However, there is an exception: If this specific regulation (on competing offers) provides for any variation or special rule, then that variation will apply.
