In wake of the Satyam saga, the market regulator has amended takeover regulations to provide an incentive for several players to buy the company at a fair value and also provide for such extraordinary cases in the future.
According to the new take over amendments for distressed companies, the acquirer can take advantage of easier pricing norms, for which the target company can apply to the Board for relaxation.
This comes after the scandal hit company has asked for exemption of certain norms to SEBI.
An easier pricing norms was considered for Satyam because an offer price under the current regulations would be the higher of the six-month and the 2-week averages of the market price of Satyam, working out to be much higher than the current market price of the stock.
The SEBI disclosure says that these set of special take over norms have not been tailored only to suit a case such as Satyam’s, but will apply to all distressed companies. These provisiosn apply to those companies where the Central Government or State Government or any other
regulatory authority has removed the board of directors of the target company and has appointed other persons to hold office as directors.
Also, when these directors have devised a plan which provides for transparent, open, and competitive process for continued operation of the target company in the interests of all stakeholders in the target company and such plan does not further the interests of any particular acquirer.
Adding on to the conditions and requirements of the competitive process being reasonable and fair, SEBI said that that it wants to work out a transparent mechanism to arrive at an open offer price.
Further, no public announcement for a competitive bid shall be made after an acquirer has already made the public announcement.