Take-private transactions pose unique challenges for regulators, given that they involve strong competing policy objectives – incentivising efficient allocation of capital and value-accretive public M&A on the one hand, and ensuring protection of interests of public shareholders in an asymmetric informational environment, on the other. The Indian securities regulator – the Securities and Exchange Board of India (SEBI) – has also grappled with this conflict and currently mandates a unique ‘reverse book building’ (RBB) method of price discovery, with the objective of securing a fair exit price for public shareholders. There is general market consensus that the RBB mechanism has made the delisting process complex, costly, uncertain and prone to manipulation.
In a welcome move, SEBI has proposed a new method for delisting at a ‘fixed price’ through its consultation paper of 14 August 2023 (Consultation Paper). The existing rules and the key highlights of the proposed changes are discussed below.
Under the existing SEBI (Delisting of Equity Shares) Regulations, 2021 (Delisting Regulations), an acquiror/promoter1, who proposes to delist the shares of a listed company (Listco) from the stock exchanges, is required to provide an exit opportunity to public shareholders of the Listco (through a delisting offer). Under the delisting offer, the acquiror offers to buy-out the public shareholders in the Listco at a price to be determined under the Delisting Regulations.Download PDF to read more
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