Withdrawal of an Open Offer
23(1).
Once an open offer is made, it is generally binding
It cannot be withdrawn freely
Withdrawal is allowed only in specific circumstances
(a)
required statutory approvals are finally refused
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
Final takeaway:
an open offer can be withdrawn if approvals are refused, but only if those approval requirements were properly disclosed upfront
(b)
if the acquirer is a natural person and
the acquirer dies
then the open offer can be withdrawn
(c)
the open offer arises from an underlying agreement
if a condition in that agreement is not fulfilled
and the failure is due to reasons beyond the acquirer’s control
and as a result, the agreement is rescinded (cancelled)
then withdrawal is allowed
but only if:
such conditions were clearly disclosed earlier
in the detailed public statement, and
in the letter of offer
Final takeaway:
withdrawal is allowed in limited cases like death of acquirer or failure of disclosed conditions beyond control, leading to cancellation of the underlying agreement
This proviso creates a restriction on withdrawal of open offer
It applies where the open offer is made:
under clause (g) of sub-regulation (2) of regulation 13
i.e., in case of a preferential issue
Normally, failure of the underlying transaction may allow withdrawal
But here, a strict rule applies
Even if:
the preferential issue (proposed acquisition) fails or is not successful
The acquirer:
cannot withdraw the open offer
The obligation to continue the offer remains
Final takeaway:
in preferential issue cases, the open offer is irrevocable, even if the underlying acquisition does not go through
(d)
if there are special circumstances
which, in the opinion of the Securities and Exchange Board of India, justify withdrawal
This is a discretionary power of SEBI
Explanation:
SEBI must pass a reasoned order permitting withdrawal
the order must clearly state the reasons
such order must be:
published on SEBI’s official website
Final takeaway:
SEBI can allow withdrawal in exceptional cases, but only through a reasoned and publicly disclosed order
23(2).
The open offer is withdrawn
After withdrawal, the acquirer has immediate obligations
Timeline:
must act within 2 working days
The actions are carried out through the manager to the open offer
(a)
make a public announcement of withdrawal
publish it in the same newspapers
where the original public announcement was made
the announcement must include:
grounds and reasons for withdrawal
(b)
at the same time (simultaneously), send written intimation to:
(i) the Securities and Exchange Board of India
(ii) all stock exchanges where shares are listed
and the exchanges must immediately make the information public
(iii) the target company (at its registered office)
Final takeaway:
withdrawal must be promptly disclosed within 2 days through newspapers and direct intimation to SEBI, stock exchanges, and the company
