SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF JACQART CHEMICAL INDUSTRIES LIMITED - EXEMPTION FROM PROVISIONS OF CHAPTER III OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997
NO. : CO/430 /TO/12/2002
1.0 M/s. Nageshwar Trading & Finance Pvt. Ltd. (hereinafter referred to as the "Acquirer") alongwith persons acting in concert with it hold 82.80% equity shares in the equity share capital of Jacqart Chemical Industries Limited (hereinafter referred to as the "target company"). The shares of the target company are listed on The Stock Exchange Mumbai. The Acquirer along with persons acting in concert propose to acquire the outstanding equity shares i.e. 17.20% from the remaining 68 public shareholders of the target company @ Rs. 10/- per share.
2.0 The Acquirer made an application dated 03/10/2002 under sub-regulation (2) of regulation 4 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "Takeover Regulations") seeking exemption from making public announcement and complying with procedural formalities under the provisions of Chapter III of the Takeover Regulations.
3.0 In the aforesaid application, the Acquirer submitted, inter-alia, the following:
i. The Acquirer along with persons acting in concert is holding 82.80% shares in the equity share capital of the target company and out of the said 82.80% shares the acquirer is holding 4.9% shares in the target company. The acquirer proposes to acquire the balance 17.20% shares from the remaining 68 public shareholders of the target company at aprice of Rs. 10/- per share.
ii. Out of 68 public shareholders, 37 shareholders representing 17.07% have willingly desired to sell their shares @ Rs. 10/- per share.
iii. Shareholders who have not approached for sale of their shares are holding an insignificant percentage of shareholdings i.e. 0.13% in the target company.
iv. The shares of the target company are infrequently traded.
v. Both Acquirer and the target company are under the same management control.
vi. The proposed open offer shall provide an exit route to the shareholders of the target company.
vii. Subsequent to the completion of the offer, necessary steps will be taken to delist the shares.
viii. The acquirer proposes to make the offer by sending individual letters to each shareholder by Registered Post A.D.
ix. They propose to open an Escrow a/c and deposit 100% of the consideration amount payable.
x. Further, they propose to submit a status report after completion of offer formalities and also submit a certificate from a practicing CA/CS.
4.0 The said application was forwarded to the Takeover Panel on 23/10/2002 in terms of sub-regulation (4) of regulation 4 of the Takeover Regulations. The Takeover Panel vide its report dated 31/10/2002 has recommended, inter alia, as under :
" The proposed Open Offer is to be made to only 68 Public Shareholders in the target company since the entire share capital of the target company is held by a small number of shareholders aggregating to total 87 shareholders which excluding the promoter group persons and Persons Acting in Concert is reduced to 68 persons only. Out of these 68 public Shareholders, 37 public shareholders representing 17.07% of the shares of the target company have willingly desired and agreed to sell their shares for a price of Rs. 10/- per share. Only 0.13% Shareholders in the target company have nor approached for sale of their shares. In the facts disclosed, it appears that the proposed Open Offer is to provide an exist route to such shareholders. In the circumstances, grant of exemption as sought is recommended subject, however, to the Acquirers –
i) Making individual offers to each of the remaining shareholders by directly addressing Offer letters offering to buy the shares ;
ii) sending such letters to each of such shareholders at the recorded addresses by registered acknowledgment due post;
iii) submitting of Certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted;
iv) offering price determined as per Regulation 20 (2) of the Takeover Code but not less then Rs. 10/- per share ; and
v) complying with other conditions as proposed in the application subject to–
a) offer to remain open for 45 days after dispatch of the letter of offer;
b) the Acquirers making payment of consideration to the shareholders of Target company within a period of 15 days from the date of closure of the offer."
4.1 The acquirer vide letter dated 25.11.2002 submitted to revise the offer price at Rs. 15/- per share in view of the various parameters and accepted share valuation methods. It is submitted that the acquirer agrees to acquire 3,50,810 equity shares of Rs. 10/- each representing 17.20% of the paid up equity capital of the target company for cash at a premium of Rs. 5/- per share aggregating to Rs. 52,62,150 /-.
5.0 I have taken into consideration the application dated 03/10/2002 the material available on record and the recommendations of Takeover Panel.
5.1 It is observed that the Acquirer along with persons acting in concert is holding 16,89,190 equity shares representing 82.80% of the paid up equity capital of the target company.
5.2 It is noted that there are only 68 public shareholders who are holding 3,50,810 equity shares representing 17.20% of the total paid up equity capital of the target company out of which 37 shareholders holding 3,48,168 equity shares representing 17.07% of the total paid up equity capital of the target company have expressed their desire to sell their shares to any acquirer at a price of Rs. 10/- per share payable in cash.
5.3 It is noted that the shares of the target company are infrequently traded at The Stock Exchange, Mumbai and the offer price of Rs. 15/- per share is justified in terms of regulation 20(5) of the Takeover Regulations. It is noted that the Acquirer has proposed to give exit opportunity to the remaining 68 public shareholders at a price of Rs. 15/- per share which provides a fair opportunity to exit to the remaining public shareholder of the target company. It is also noted that the Acquirer is acquiring the shares only for the purpose of giving an exit option to the public shareholders and thereafter to delist equity shares of the target company from the stock exchange.
5.4 It is observed that the Acquirer has confirmed that it will send letters of offer for purchasing the shares to all the 68 public shareholders by Registered Post A.D.
6.0 Taking into consideration the above, the recommendations of the Takeover Panel and the interest of the public shareholders of the Target company, in exercise of the powers conferred upon me under sub-section (3) of Section 4 of the Securities and Exchange Board of India Act, 1992 read with sub-regulation (6) of regulation 4 of the Regulations, I hereby grant exemption, to the Acquirer from complying with the provisions of Regulation 13 (Appointment of a merchant banker) Regulation 14 (Timing of the public announcement of offer), Regulation 15 (Public announcement of offer) Regulation 16 (Contents of the public announcement of offer) Regulation 18 (Submission of letter of offer to Board) as contained in Chapter III of the Takeover Regulations with regard to the proposed open offer to be made to the 68 public shareholders of the target company for acquisition of 3,50,810 shares representing 17.20% of the total paid up equity capital of the target company at a price of Rs 15/- per share in terms of sub-regulation (2) of Regulation 11 of the Regulations, subject to the following –
i) The acquirer shall make individual offers to each of the remaining public shareholders by directly addressing Offer letters offering to buy the shares ;
ii) Such letters shall be sent to each of such shareholders at the recorded addresses by registered acknowledgment due post;
iii) The acquirer shall submit Certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted.
Date: December 24 , 2002
Place: Mumbai
G.N. BAJPAI
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA