3/6/2003
PR-128/2003
TAKEOVERS DIVISION
In The Matter Of Acquisition Of Shares/ Voting Rights Of Amzel Automotive Limited - Violation Of Regulation 11(2) Of The SEBI (Substantial Acquisition Of Shares And Takeovers) Regulations, 1997
Sh Saleem Fazelbhoy, his family members and M/s Amzel Pvt Limited (hereinafter collectively referred to as "the Acquirers") are the promoters of Amzel Automotive Limited (hereinafter referred to as "the Target company"). The acquirers vide letter dated 03.12.02 informed SEBI that they were holding 85.48% of the total paid up capital of the Target company on 20.02.97 and in the year 1998, they acquired 3150 shares constituting 0.52% shares of the Target company and increased their shareholding to 86%.
As the said acquisition was made without making a public announcement as required under Regulations 11(2) of the Regulations, SEBI issued a show cause notice on 27.12.02. The Acquirers replied vide letter dated 6.01.2003. Thereafter, a personal hearing was granted to the Acquirers by SEBI on 14.03.03 wherein they reiterated the submissions made by them in reply to the show cause notice.
The acquirers submitted, inter alia, that they were under the honest belief that the above acquisition of small number of shares would be exempt as creeping acquisition. The acquirers further submitted that there was no change in the management and that there was no unfair advantage or disproportionate gain has been made by or accrued to the acquirers. The acquirers, therefore, while admitting the technical lapse requested that the same should not be viewed seriously so as to merit any penal action of the kind stated in the show cause notice.
Based on the material available on record, SEBI observed that if the acquisition by the Acquirers triggered the provisions of the Regulations, then the Acquirers are obligated to comply with the same, and provide an exit option to the shareholders of the Target company irrespective of the number of shareholders. SEBI also observed that the requirement of Regulation 11(2) is very clear i.e. no acquirer shall acquire additional shares (even one share) without making the public announcement and held that the direction to make public announcement is not a penalty and the purpose of this direction is to provide an exit option to the shareholders of the Target company consequent to the triggering of the provisions of the Regulations.
In view of the above, SEBI held that since the Acquirers had acquired the aforesaid shares without making a public announcement as admitted by them, they had violated regulation 11(2) read with 14(1) of the Regulations. Therefore, SEBI vide order dated 30.5.03 directed the Acquirers to make a public announcement as required under Chapter III of the said Regulations in terms of Regulation 11(2) taking 7.01.98 as the reference date for calculation of offer price and that the public announcement shall be made within 45 days of passing of this order. SEBI also directed the acquirers to pay interest @ 15% per annum on the offer price from 08.05.98 till the date of actual payment of consideration for the shares to be tendered and accepted in the offer directed to be made by the Acquirers.
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3/6/2003
PR-129/2003
TAKEOVERS DIVISION
In the matter of proposed acquisition of shares of NRB Bearings India Ltd & SNL Bearings Ltd.
The Timken company (hereinafter referred to as “the Acquirer”) made an application dated 20.12.02 to the Securities and Exchange Board of India (hereinafter referred to as SEBI) under regulation 4(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as “Regulations”) seeking exemption from the provisions of Chapter III of the Regulations in respect of indirect acquisition of NRB Bearings Ltd. (hereinafter referred to as “Target company”) and SNL Bearings Limited (hereinafter referred to as SNL).
Nadella S.A. (hereinafter referred to as Nadella) is a company organised and existing under the laws of France and a direct wholly owned subsidiary of . Ingersoll-Rand Company Limited (hereinafter referred to as “IR“). Nadella holds 26% shares/ voting rights in the equity share capital of target company. The Acquirer and IR are parties to Stock and Asset Purchase Agreement (SPA) dated October 16, 2002 pursuant to which the acquirer agreed to acquire from IR the engineered solutions business segment of IR and also the voting securities of Nadella held by IR. The Target company is holding 63.98% shares/voting rights in SNL. The shares of the Target company are listed at BSE, NSE, DSE and the Chennai Stock Exchange Ltd. The shares of SNL are listed at BSE.
It was contended, inter alia, by the acquirer that the proposed acquisition does not attract Regulation 10 because Nadella is not a “company”. It is not incorporated under the Companies Act, and hence, the voting securities of Nadella cannot be considered as “shares”. Further, it was contended that the proposed acquisition does not attract Regulation 12 because the proposed acquisition is neither a direct nor an indirect acquisition of “shares” and therefore, will not result in the Acquirer acquiring “control” over the Target company. However, in the event that SEBI believes that any of Regulation 10 or Regulation 12 applies to the proposed acquisition, the Acquirer requested SEBI to exempt the proposed acquisition from the applicability of such Regulation and other provisions of Chapter III of the Regulations.
The aforesaid application for exemption dated 20.12.02 was forwarded to the Takeover Panel. The Takeover Panel vide its report dated 23.01.03 recommended grant of exemption as sought by the Acquirers subject to certain conditions. However, during the personal hearing before the Chairman, the acquirer, requested for grant of unconditional exemption. The application was remitted back to the Takeover Panel for its reconsideration. The Takeover Panel vide its report dated 30.04.03 made no modification in the recommendation made earlier vide report dated 23.01.03.
It was observed that when the Acquirer agreed to, inter alia , purchase the voting securities of IR in Nadella and indirectly the 26% held by Nadella in the Target company vide the SPA from IR, it came within the definition of the term Acquirer and therefore, the proposed acquisition attracted the provisions of Regulation 10. However, Nadella is not in control over Target company and so the change in control over Nadella from IR to Acquirer would not result in change in control over the Target company. The Sahney family holds the controlling majority stake (around 59%) and controls the management and the policy decisions of the Target company. Therefore, provisions of regulation 12 are not attracted. It was further observed that as far as SNL is concerned, there is no direct or indirect acquisition of shares or voting rights and/or control by the acquirer in respect of SNL consequent upon the SPA. Hence, regulations 10 and 12 are not attracted in respect of SNL.
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 under section 4(3) of the SEBI Act 1992 read with regulation 4(6) of the Regulations, SEBI by order dt.29.5.2003, granted exemption to the acquirer in respect of target company subject to certain conditions as stated in the order. SEBI further held that the provisions of Regulations 10 and 12 are not attracted in case of SNL.
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