SECURITIES AND EXCHANGE BOARD OF INDIA 

ORDER

WTMO/26/CFD/06/2006

1.0 BACKGROUND -

1.1 M/s Assam Carbon Products Ltd. (hereinafter referred to as ‘the target company’) is a company incorporated under the Companies Act, 1956, having its registered office at Birkuchi, Guwahati, Assam – 781 026. The equity shares of the target company are listed on the Kolkata Stock Exchange Ltd. and Guwahati Stock Exchange Ltd.

1.2 The Morgan Crucible Company Plc and Morganite Carbon Ltd. (hereinafter referred to as ‘the acquirers’) are foreign promoters of the target company and are presently holding 51.24% of the equity shares of the target company.

2.0 APPLICATION FOR EXEMPTION -  

2.1 The target company has announced its plan to buy-back its shares from the shareholders and due to the said buy-back offer, the voting rights of the acquirers would increase from 51.24% to 59.67%, in case of 100% response to the said buy-back offer and the acquires not offering to sell any shares held by them in the proposed buy-back offer of the target company.

2.2 Vide letter dated March 29, 2006, the acquirers filed an application with the Securities and Exchange Board of India (SEBI) under regulation 4(2) read with regulation 3(1) (l) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,1997, (hereinafter referred to as the ‘Takeover Regulations’). Since, the post buy-back shareholding of acquirers may increase to a level beyond 55%, the exemption is sought from the applicability of regulation 11(1) of the Takeover Regulations, inter alia on the following grounds:- 

a)     The acquirers are foreign promoters of the target company and hold 51.24% of the share capital of the target company and they are in control over the target company.

b)     Increase in voting rights of the acquirers is incidental to the buy-back proposal of the target company and is not an active acquisition.

c)      The purpose of buy-back of equity shares by the target company is to enhance the earnings per share and create long-term shareholders value. The said buy-back will provide a reasonable exit opportunity to those shareholders who so desire whilst at the same time safeguarding the interest of continuing shareholders.

d)     Even after buy-back of the equity shares by the target company, the voting rights of the acquirers shall remain maximum at the level of 59.67%, which meets with the requirements of the Listing Agreement with the stock exchanges where the shares of the target company are listed as the minimum public shareholding in target company shall remain at a level more than 40%.

e)     The equity shares of the target company are not frequently traded on both the stock exchanges and the proposed buy-back offer will give the shareholders of the target company an opportunity to exit at a price determined as per the method which is similar to the method provided in Takeover Regulations.

f)        The price at which the buy-back is proposed is Rs. 80/- and is higher than the book value of Rs. 45.76 per share (as on 31^st March 2005).

g)     The acquirers do not propose to acquire a single share of the target company and the increase in their shareholding in the target company from 51.24% to 59.67% is only incidental to the proposed buy-back offer assuming 100% response in the said buy-back offer.

h)      There would not be any change in control over the target company pursuant to the increase in the shareholding of the acquirers.

i)        The acquirers will not offer any share held by them in the buy-back offer for the reason that in addition to being major shareholders, they are also the Technical Collaborators and have provided technology to the target company.

j)        The acquirers had increased their shareholding in the target company to the majority level at the time of providing technical know-how. The performance as well as future growth of the target company depends entirely upon the technical as well as day-to-day management support of the acquirers.

k)      The acquirers are world leaders in carbon technology and have plans to develop the target company as a global source for its requirements world over. Therefore, they are committed to the growth of the target company and shall be supporting the target company in its growth objectives by providing the latest technology, advanced products and access to its facilities such as training and R&D.

2.3             The shareholding pattern of the target company before and after the proposed acquisition is as under:

3.0 RECOMMENDATION OF THE TAKEOVER PANEL –

3.1 The aforesaid application dated March 29, 2006 was forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations. The Takeover Panel vide its report dated May 11, 2006 has recommended as under–

“Equity shares of ACPL are listed at Calcutta and Gauhati, but are not traded. Buy-back will give share holders opportunity to exit at price determined as per the method provided in Takeover Regulations. The buy-back is proposed at Rs. 80/-, which is higher than the book value of the share Rs. 45.76 as on 31^st March 2005. The group acquiring i.e. Morgan Group does not propose to acquire any shares but still there is increase in their share holding as indicated above. It is incidental to buy-back offer, Morgan Carbon is not acquiring any share against buy-back offer. The Morgan Carbon are technical collaborators have provided technology or technical knowhow. Providing of this technical knowhow has resulted in profit to the target company Morgan Carbon is leader in carbon technology and plans to develop ACPL as global source.

After considering the proposal and documents submitted the Panel is recommending grant of exemption as sought.”

4.0 FINDINGS -

4.1           I have carefully considered the application dated March 29, 2006 filed by the acquirers, the above mentioned recommendations of the Takeover Panel and relevant material available on record.

4.2  I observe that the acquirers are not acquiring any shares of the target company directly and the increase in their voting rights from 51.24% to 59.67%, is incidental to the proposed buy-back offer made by the target company. I note that the acquirers in their application have undertaken that they will not offer any shares in the said buy-back. I also note that there would not be any change in control as the acquirers are the promoters of the target company and have control over the target company. I also note that even in case of 100% response in the proposed buy-back offer and successful completion of the said buy-back, the voting rights of the acquirers shall be maximum at the level of 59.67% and the public shareholding in the target company would be at level more than 40% which would meet with the requirements of the Listing Agreement with the stock exchanges where the shares of the target company are listed.

 4.3 I note that the shares of the target company are not frequently traded on both the stock exchanges where the shares of the target company are listed and book value is Rs. 45.76 per shares and the proposed buy-back offer provides a reasonable exit opportunity to the shareholders of the target company at a better offer price of Rs. 80 per shares.

4.4 In view of the above facts and circumstances, I agree with the recommendations of the Takeover Panel and consider the present case as a fit case for granting exemption from making a public announcement as required under regulation 11(1) of the Takeover Regulations.

5.0 ORDER -

5.1  In view of the above findings, I , in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with sub - regulation (6) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirers, namely, The Morgan Crucible Company Plc and Morganite Carbon Ltd., U. K., from complying with the provisions of Regulation 11(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 with regard to the increase in their voting rights from 51.24% to 59.67%, consequent to the proposed buy-back offer of Assam Carbon Products Limited, the target company.

  T. C. NAIR

    MEMBER 

SECURITIES AND EXCHANGE BOARD OF INDIA

Place: Mumbai

Dated: June 29, 2006