SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED INDIRECT ACQUISITION OF SHARES OF LIFESTYLE FABRICS LTD. – EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997
1.0 BACKGROUND
1.1 Arvind Brands Ltd. (hereinafter referred to as ‘the acquirer) is a public limited company incorporated under the Companies Act, 1956, having its registered office at Arvind Mills Premises, Naroda Road, Ahmedabad - 380025. The acquirer and Asman Investments Ltd. are 100% subsidiaries of Arvind Mills Ltd. The said Asman Investments Ltd. is holding 71.80% equity shares of Lifestyle Fabrics Ltd. (hereinafter referred to as the target company).
1.2 The equity shares of the target company are listed at Bombay Stock Exchange Ltd., Delhi Stock Exchange Association Ltd., Ahmedabad Stock Exchange Ltd., Calcutta Stock Exchange Association and Bangalore Stock Exchange Ltd. The acquirer proposes to acquire 39,200 equity shares of Asman Investment Ltd. from Arvind Mills Ltd., the parent company. The said 39,200 equity shares accounted for 49% of the said Asman Investments Ltd. Pursuant to the said proposed acquisition, the holding of Arvind Mills Ltd. in Asman Investments Ltd. would reduce from 100% to 51%.
1.3 The proposed acquisition of 49% equity shares of Asman Investments Ltd., by the acquirer from Arvind Mills Ltd. would lead to the indirect acquisition of shares of the target company, which would trigger the provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as the Takeover Regulations).
2.0 APPLICATION FOR EXEMPTION
2.1 The acquirer vide letter dated February 12, 2007 filed an application under Regulation 4(2) of the Takeover Regulations seeking exemption from the provisions of Regulations 10, 11 (1), 11(2) and 12 of Chapter III of Takeover Regulations with respect to the proposed indirect acquisition of the shares / control of the target company. In the said application, the acquirer inter alia made the following submissions:
a. All the companies viz. The Arvind Mills Ltd., Asman Investments Ltd., the acquirer and the target company are part of Lalbhai Group.
b. The acquirer does not hold any shares directly in the target company. However, it has made disclosures under regulation 8(2) of the Takeover Regulation as one of the promoters of the target company.
c. For strategic reasons and particularly with a view to focus on the core business activity i.e. manufacturing and selling garments, it has been decided by the management of Arvind Mills Ltd. to divest its investment portfolio in such a manner that the ultimate control remains is preserved with the flagship company i.e. Arvind Mills Ltd.
d. There will be no change in the ultimate ownership or control over the Target company.
e. Since the group companies have been exercising control over the target company, it would not affect the interests of the public shareholders of the target company.
f. The acquirer is one of the promoters of the target company along with other promoter group companies belonging to Lalbhai Group.
g. The proposed acquisition is an internal arrangement amongst the promoters of the target company. The proposed acquisition is for the purpose of consolidation of the shareholding of the target company in the specific promoter group company. The acquirer further submitted that, even though as a result of the proposed acquisition there would be no change in the management and control of the target company and in its status, as the acquirer continued to be promoters of the target company, technically it might be possible to construe that there would be indirect acquisition. Accordingly the application is made.
h. The share market value of the target company is not going to be affected by the proposed acquisition. The proposed acquisition would not cause any loss or prejudice to any of the shareholders of the target company.
i. In view of the growing economy, inter alia the parent company (Arvind Mills Ltd.) proposed to transfer part of its investments held in Asman Investments Ltd. to the acquirer without effecting any kind of change of control of two listed subsidiary companies.
3.0 RECOMMENDATION OF THE TAKEOVER PANEL
3.1 The aforesaid application dated February 12, 2007 was forwarded to the Takeover Panel by SEBI in terms of sub-regulation (4) of regulation 4 of the Takeover Regulations. The Takeover Panel, vide report dated March 6, 2007 (forwarded to SEBI vide letter dated March 20, 2007) has recommended as under –
“Arvind Brands Ltd. and Asman Investments Ltd. are 100% subsidiary of Arvind Mills Ltd. and Asman Investments Ltd. is holding shares in various group companies including Arvind Products Ltd. and on the date of application Asman Investments Ltd held 39,49,093 equity shares/voting rights constituting 71.80% of Lifestyle fabrics Ltd.
As a result of the proposed acquisition the acquirer would indirectly acquire shares/voting rights and control of Arvind Products Ltd. The Panel has considered the case of Arvind Products Ltd. proposed to be acquired by Arvind Brand Ltd. and for the reasons stated therein the panel does not find difficulty in granting exemption sought for.”
4.0 FINDINGS
4.1 I have carefully considered the application dated February 12, 2007 filed by the acquirer, the above mentioned recommendations of the Takeover Panel and relevant materials available on record.
4.2 In the present case, the acquirer and Asman Investments Ltd are 100% subsidiary of Arvind Mills Ltd. The acquirer proposes to acquire 49% of the equity shares of Asman Investments Ltd. from Arvind Mills Ltd., the parent company. Thus, the acquirer would indirectly acquire the shares of the target company. At present, the parent company (Arvind Mills Ltd.) is controlling the target company through its 100% subsidiary viz. Asman Investments Ltd. Pursuant to the proposed transaction, the target company would be controlled by the parent company through the said Asman Investments Ltd. and the acquirer. As the parent company (Arvind Mills Ltd.) would continue to control the target company as mentioned above, there would not be any change in the ultimate control of the target company and therefore the proposed transaction would not cause any loss or prejudice to any of the shareholders of the target company.
4.3 In view of the above facts and circumstances, I agree with the recommendations of the Takeover Panel and find that the present case is fit for granting exemption from the applicability of Regulation 10 and 12 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 Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirer, Arvind Brands Ltd. from complying with the provisions of regulation 10 and 12 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 in the case of indirect acquisition of the shares of the target company, Lifestyle Fabrics Ltd., pursuant to its proposed acquisition of 49% equity shares of Asman Investments Ltd from Arvind Mills Ltd.
5.2 The acquirers shall complete the transaction within 30 days from the date of this order and file a report with Securities and Exchange Board of India in the manner specified in Regulation 3(4) read with 3(5) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 confirming compliance.
G. ANANTHARAMAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Place: Mumbai
Date: 28-06-2007