Withdrawal of an Open Offer

Regulation 23. Withdrawal of open offer.

23(1).

• Once an open offer is made, it is generally binding and It cannot be withdrawn freely.

• Withdrawal is allowed only in specific circumstances:

• (a)

  1. The required statutory approvals are finally refused.

  2. These approvals may be for the open offer itself, or for the underlying acquisition.

• But this ground is valid only if such approval requirements were clearly disclosed earlier in the detailed public statement, and in the letter of offer.

• So , an open offer can be withdrawn if approvals are refused, but only if those approval requirements were properly disclosed upfront.

• (b)

  1. If the acquirer is a natural person and the acquirer dies then the open offer can be withdrawn.

• (c)

  1. If the open offer arises from an underlying agreement if a condition in that agreement is not fulfilled:

     1. and the failure is due to reasons beyond the acquirer’s control

     2. and as a result, the agreement is rescinded (cancelled)

  2. Then withdrawal is allowed but only if such conditions were clearly disclosed earlier in the detailed public statement, an in the letter of offer.

• So , withdrawal is allowed in limited cases like death of acquirer or failure of disclosed conditions beyond control, leading to cancellation of the underlying agreement.

Irrevocability of Open Offer in Preferential Issue Cases

• When an offer price is made under 13(2)(g) with respect to a preferential issue:

  1. There is a restriction on withdrawal of open offer.

  2. Normally, failure of the underlying transaction may allow withdrawal.

• But here, a strict rule applies

  1. Even if the preferential issue (proposed acquisition) fails or is not successful:

  2. The acquirer cannot withdraw the open offer.

  3. The obligation to continue the offer remains.

• So , in preferential issue cases, the open offer is irrevocable, even if the underlying acquisition does not go through.

• (d)

  1. If there are special circumstances which, in the opinion of the Securities and Exchange Board of India, justify withdrawal then:

     1. An Open offer can be withdrawn.

     2. SEBI has the discretionary power to allow such withdrawal.

• Explanation:

  1. SEBI must pass a reasoned order permitting withdrawal.

  2. The order must clearly state the reasons such order must be: published on SEBI’s official website.

• So , SEBI can allow withdrawal in exceptional cases, but only through a reasoned and publicly disclosed order.

23(2).

• When an open offer is withdrawn the acquirer has immediate obligations.

• These obligations have to be fulfilled by the acquirer in 2 days.

• The obligations are supposed to be carried out through the manager to the open offer.

• (a)

  1. The acquirer make a public announcement of withdrawal.

  2. The acquirer must publish it in the same newspapers where the original public announcement was made.

  3. The announcement must include grounds and reasons for withdrawal.

• (b)

  1. At the same time (simultaneously), the acquirer should send written intimation to:

     1. (i). The Securities and Exchange Board of India.

     2. (ii). All stock exchanges where shares are listed and the exchanges must immediately make the information public.

     3. (iii). The target company (at its registered office).

• So , withdrawal must be promptly disclosed within 2 days through newspapers and direct intimation to SEBI, stock exchanges, and the company.