PEARL ORGANICS LTD Vs. STATE
SECURITIES APPELLATE TRIBUNAL
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(1.) 0 BACKGROUND
1.1 Pearl Organics Ltd (POL) desires to acquire the SetCal brand from Wander Private Ltd [Wander) at an agreed value of Rs.370 lacs as consideration therefor.
1.2 As consideration for the said acquisition of SetCal brand from Wander, POL proposes to allot its 37,00,000 equity shares of Rs.10/- each at par, aggregating to Rs.370 lacs, to Wander on preferential basis by way of preferential allotment. The said allotment of equity shares of POL (hereinafter referred to as the "Target Company) to the Wander (hereinafter referred to as the "Acquirer") was approved by the shareholders of the Target Company at its EGM held on 7th February, 2002.
1.3 The shares of the Target company are listed at the The Stock Exchange, Mumbai.
(2.) 0 APPLICATION FOR EXEMPTION
2.1 The Acquirer made an application dated 20.2.2003 to the Securities and Exchange Board of India (hereinafter referred to as SEBI) under sub-regulation (2) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations") seeking exemption from the applicability of Chapter III of the Takeover Regulations for the aforesaid preferential allotment.
Ubmissions IN THE EXEMPTION APPLICATION
In the aforesaid application, the Acquirer , inter-alia, submitted the following:
3.1 Presently the promoters and promoter group of the Target Company are holding 7,75,800 equity shares of the company forming 20.14% of the paid up share capital.
3.2 The Target Company now proposes to diversify its product line and enter into the branded formulations market. Further to its plans for diversification, the Target Company proposes to acquire the SetCal brand from the acquirer.
3.3 As consideration for the said acquisition, the Target Company proposes to allot 37,00,000 equity shares of Rs.10/- each at par aggregating Rs.370 lacs to the Acquirer on preferential basis in terms of the SEBI (DIP) Guidelines for preferential allotment.
3.4 The said allotment of equity shares to the Acquirer has been approved by the shareholders of the Target Company at the EGM of the members held on 7.2.03.
3.5 The said allotment of equity shares will reduce the holding of the promoters of the Target Company from 20.14% to 10.27% of the post-issue capital.
3.6 Post-preferential allotment holding of the Acquirer in the Target company will be 48.99% of the post preferential issue capital while the present public shareholding of 79.86% will reduce to 40.74% of the post preferential issue capital.
3.7 The Acquirer does not have any intention to exercise management control over the day to day management of the Target Company.
3.8 Acquisition of brand will bring additional revenues to the Target Company which will enhance shareholder's wealth and will be beneficial to the Acquirer in the long run.
(3.) 0 RECOMMENDATION OF THE PANEL
The said application dated 20.2.2003 was forwarded to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated 6.3.2003 recommended, inter alia, as under :
"Though Wander Pvt Ltd has stated that it does not intend to have any role in the day to day management of Pearl Organics Ltd, the holding of Wander Pvt Ltd in Pearl Organics Ltd post preferential allotment will be 48.99% of the post preferential issue capital while the present public shareholding of 79.86% will reduce to 40.74% of the post preferential issue capital resulting in transfer of control to Wander Pvt Ltd since 'control' as per Regulation 2(1) (c) of the Takoever Code includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or in any other manner.
Taking into consideration interest of public shareholding in Pearl Organics Ltd and with intend to safeguard the same, grant of exemption as sought is not recommended.";
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