INDIA Law and Practice Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
apply. Additionally, parties also use adjustment mechanisms, such as working capital adjust - ments and locked box adjustments, for bridging valuation gaps in an industry with high valuation uncertainty. Such adjustment mechanisms are more common in unlisted entities since the open offer pricing rules provide that the price payable to the shareholders under the open offer should be the highest of the pricing parameters set out in the Takeover Regulations, which includes the highest price payable under the transaction documents. In terms of the consideration which is payable to the public shareholders in an open offer, while cash is the most common form of consideration, Takeover Regulations also permit the considera - tion to be paid by way of: • (i) listed shares in the share capital of the acquirer or a person acting in concert with it; • (ii) listed debt securities of the acquirer or a person acting in concert subject to rating thresholds; • (iii) convertible debt securities which result in the shareholder acquiring the securities listed in (i); or • (iv) a combination of any of the above. However, it is uncommon for the acquirer to use any of the above (other than cash) to discharge consideration. 6.4 Common Conditions for a Takeover Offer As a general practice, acquirers try and include the conditions to the transaction (regulatory and third-party approvals, lender consents and transaction specific conditions) as the condi - tions to the open offer so as to enable such acquirers to withdraw from the open offer and terminate the underlying transaction if the con -
ditions are not satisfied. Other than for regula - tory approvals, SEBI generally does not permit withdrawal of an open offer and any attempt to do so may result in litigation. Please also refer to 6.5 Minimum Acceptance Conditions for details on conditional open offers. 6.5 Minimum Acceptance Conditions Conditional open offers are open offers which are conditional upon a minimum level of accept - ance of the offer by public shareholders. In other words, if the desired level of acceptance of the offer is not reached, the base transaction which originally triggered the open offer requirement must be terminated and the open offer with - drawn. Conditional open offers are generally made by acquirers who desire to reach a major - ity shareholding in a target company, since such shareholding enables them to pass resolutions which only require a simple majority. 6.6 Requirement to Obtain Financing In the case of listed companies, a tender offer cannot be conditional on the bidder obtaining financing. As a precursor to making a public announcement for a tender offer, the acquirer is required to demonstrate firm financial arrange - ments for the open offer and the underlying trans - action. Additionally, the acquirer is also required to fund an escrow account with a portion of the total open offer consideration through cash or bank guarantee within a period of three working days from the date of the public announcement. In so far as transactions with unlisted entities are concerned, such transactions may be con - tingent on the bidders obtaining financing but that would be driven by commercial considera - tions rather than legal requirements. 6.7 Types of Deal Security Measures Break-up fees or non-solicitation provisions are some popular measures to ensure deal security.
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