Sebi, bourses give conditional nod for Idea-Vodafone merger
NEW DELHI: The Securities and Exchange Board of India (Sebi) and stock exchanges have given a conditional approval to the $23 billion merger of Idea Cellular Ltd and Vodafone India, which would be subject to the outcome of an ongoing probe by the market regulator, and approvals from public shareholders and the National Company Law Tribunal (NCLT).
The deal was announced in March and recently got clearance from antitrust regulator Competition Commission of India. In their no-objection letters on “draft composite scheme of amalgamation and arrangement among Vodafone Mobile Services, Vodafone India and Idea Cellular and their respective shareholders and creditors”, BSE Ltd and the National Stock Exchange said that all the conditions put forth by the regulator need to be placed before the NCLT while seeking its approval.
The “no-objection” as per Sebi regulations will enable the companies to file the draft scheme with NCLT. In its detailed comments on the draft scheme, Sebi said it had received a complaint alleging that one of the promoters of Idea Cellular had purchased 0.23% of the firm’s shares before the announcement of the draft scheme of amalgamation and these transactions by the purchasers were in violation of securities laws. “The said allegations are being examined by Sebi,” the regulator said. In this respect, the purchasers have submitted a voluntary undertaking not to dispose of these shares till further directions of Sebi and any liability eventually held to be valid against the purchasers shall be borne by them.
Sebi has also received complaint about alleged violation of takeover norms as the shareholding of Idea would increase from about 21% to about 26% pursuant to the scheme. “The acquisition pursuant to draft scheme of arrangement is exempt from the obligation to make an open offer... if the acquisition is pursuant to a scheme of arrangement, interalia, including amalgamation, merger or demerger, pursuant to an order of a court or a competent authority under any law or regulation, Indian or foreign. Thus, the said exemption is applicable only if NCLT approves the draft scheme.”
The regulator further said an “abridged prospectus” about the deal will need to contain a risk factor (at number 1) detailing the risks associated with the outcome of the examination by Sebi of the allegations in the complaint..