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Thursday, Dec 02, 2021
Outlook.com
takeovers

It's Caveat Emptor

The oldest rule in the book comes into force—especially since the rules are not made clear

It's Caveat Emptor
It's Caveat Emptor
outlookindia.com
-0001-11-30T00:00:00+05:53

Over two years after Gujarat Ambuja Cement picked up a 14.5 per cent stake in the Associated Cement Companies (ACC), and a year after the Aditya Birla Group got 10.5 per cent in Larsen & Toubro (L&T), two of India's biggest corporate deals are caught in a legal logjam. At the heart of the problem is the question of control; about whether the purchases constituted a takeover and a change in management of the target companies. The acquirers say no and the Securities and Exchange Board of India (SEBI) had no problems when the deals happened.

Suddenly, a string of events in the last few weeks changed all that. First, the Special Appellate Tribunal (SAT) asked SEBI to take another look at the Ambuja-ACC pact. That forced the market regulator to stall the similar Birla-L&T agreement which, in turn, forced the Birlas to approach SAT. The tribunal, in its hearing on November 21, gave SEBI four days' time to file an affidavit. In the midst of all this, the investors and professional managers in both ACC and L&T are lobbying to protect their interests. Today, any decision on the matter will need to deal with issues of business ethics, corporate governance and the rights of minority shareholders.

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