Draft report lowers disclosure levels

new delhi: the draft takeover report being formulated by the p n bhagwati panel has recommended several significant changes in the code, including allowing banks and fis’ funding of takeovers and disallowing original bidders from withdrawing the offer after a competitive bid comes in. this allows acquirers to offer shares of a third listed company in the open offer, tightening of disclosure norms at 5 per cent, 10 per cent and 14 per cent. for acquirers holding beyond 15 per cent, sales or purchases at every 2 per cent level to be disclosed. also, acquirers will now required to give an undertaking that no asset stripping would take place, and no creeping acquisition to be allowed beyond 75 per cent holding, according to the draft report. in the context of lack of institutional funding for takeovers, the committee recommended that banks and financial institutions should be encouraged to consider financing takeovers, which would help develop an active market for leveraged buyouts. sebi may take up the matter with rbi for facilitating such funding, it said. on competitive bids, the current regulations provide for withdrawal of offer by the original acquirer following a competitive bid. the committee felt that rather than allowing the competitive bidder also to withdraw which would mean that no offer ultimately subsists, one should not allow withdrawal of offer by the original bidder also because an acquirer while making any bid for a company should be fully prepared for the consequences, including the possibility of a counter offer. therefore, it has said that the original bid cannot be withdrawn. the committee felt that permitting the acquirer to offer shares of a third company as consideration for shares tendered would increase the flexibility available to him in funding the offer. the committee also felt that requiring all offers should be for cash only would be a retrograde step and would make offers for large companies difficult.