Friday, November 02, 2001
MUMBAI
The Securities and Exchange Board of India (Sebi) has decided
to ask Hughes Tele.com India and Hughes Software Systems,
subsidiaries of Hughes Electronics of the US, why their new
parent should be exempted from making open offers for the
shareholders of the two companies.
Early this week, EchoStar Communications agreed to acquire
Hughes Electronics from its parent, General Motors, in a cash
and stock deal valued at $26 billion.
"We are examining the entire issue based on our observations.
Though the deal happened in the US, we would like to monitor
its implications in the Indian market. We will ask the Indian
subsidiaries for reasons for not coming out with open offers
for the Indian shareholders as the parent firm's management
has changed," a top Sebi official said.
Recently, Hughes Software informed the domestic stock exchanges
that the question of an open offer did not arise. "Since
there is no agreement orintention to acquire the Indian shares
of Hughes Software and since the amalgamation is not an indirect
acquisition of Hughes, and there is no change in control,
no public offer is likely to be made," the company said
in a notification to the stock exchanges.
But Sebi demurs, though it is yet to formally communicate
this to the two companies.
"We will approach them at an appropriate time. As of
now we are assessing the situation. But no firm in India should
misuse loopholes in the system," the official said here
on Thursday.
According to Sebi's Takeover Code, any takeover that leads
to a change in management control must necessarily be followed
by an open offer to buy at least an additional 20 per cent
of the voting capital of the company from its existing shareholders.
Sebi has at various times upheld the provisions of this "chain
rule" which essentially implies that domestic shareholders
must always get a chance to exit the company in case there
is a change in management or ownership at the top.
Though the market regulator does not want to comment further
on the issue, the official said Sebi would have no option
but to ask the new parent to make an open offer if its investigations
suggest violation of the spirit of the (takeover) code. Hughes
Tele.com India is a basic telephony operator in
Maharashtra, while Hughes Software is one of the leading infotech
players. Hughes Electronics of the US holds a 55.6 per cent
stake in Hughes Software and a 25 per cent stake in Hughes
Tele.com.
Last updated : February 2, 2004
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