What is a public announcement?

A PUBLIC announcement is an announcement given in the newspapers by acquirer primarily disclosing his intention to acquire a minimum of 20 per cent shares of target company from existing shareholders by means of an open offer.

The other disclosures in this announcement include the offer price, number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders, and the period within which all the formalities pertaining to the offer will be completed.

The PA is made to ensure that the shareholders of the target company are aware of the exit opportunity available to them in case of a takeover or substantial acquisition of shares in the target company. They may, on the basis of disclosures contained therein and in the letter of offer, either continue with the target company or decide to exit from it.

Can the acquirer make an offer for less than 20 per cent of shares?

Yes, the acquirer can make an offer for less than 20 per cent of shares of the target company if he is already holding 75 per cent or more of voting rights/ shareholding in the target company and has deposited in the escrow account in cash a sum of 50 per cent of the consideration payable under the public offer.

Who is required to make a Public Announcement and when is it required to be made?

The acquirer is required to appoint a merchant banker registered with SEBI before making a PA and through the banker, the acquirer is required to make a PA within four working days of the entering into an agreement to acquire shares which triggered of the takeover code.

Is the appointment of a merchant banker for the offer process mandatory?

Yes, as mentioned above, the appointment of one is mandatory for the offer process which starts with making a PA.

What documents are to be filed with SEBI after making a PA, and when are these documents to be filed?

The acquirer is required to file a draft Offer Document with SEBI through the merchant banker within 14 days from the date of public announcement along with filing fees of Rs 50,000 per offer document (payable by banker's cheque/demand draft).

Along with the draft offer document, the merchant banker also has to submit a due diligence certificate as well as certain registration details as per SEBI circular no. RMB (G-1) series dated June 26, 1997

The filing of the draft offer document is a joint responsibility of both acquirer and banker.

Does SEBI `approve' the draft offer document? What happens thereafter?

SEBI does not approve or vet the draft offer document The role of SEBI is to ensure that the disclosures made in the offer document are generally adequate to enable the shareholders to make an informed decision regarding the offer. SEBI only conveys its comments, if any on the draft offer document to the merchant banker which may result in certain disclosures to be made in the offer document before it is despatched to the shareholders.

SEBI is, however, under no obligation to send any comments on draft offer document. The merchant banker, being the registered intermediary, is expected to ensure that the offer document contains all the relevant information and full and accuracy thereof.

(SEBI Guide)