ZENOTECH

TEXT OF THE LETTER WRITTEN TO SEBI & ORS.

The unanswered questions-- Corrigendum dated 23 August,2010 –Open offer of Zenotech Laboratories Limited.
It seems that with an idea to scare Dr. Jayaram Chigurupati into submission, in the above corrigendum it has been written in Bold & In Caps under the Title IMPORTANT INFORMATION that The acquirer do not intend to acquire any share outside the offer or to come out with a follow on offer or a delisting offer etc.

What is required to be stated has not been stated, but the Acquirer & Merchant Bankers have otherwise gone much beyond in making a futuristic statement.

On the lighter side, it reminds me of the popular Hindi Film-ARADHANA & a song in the film wherein the heroine says “MAIN SAB KAHUNGI LEKIN WOH NAA KAHUNGI JISKA TUMKO INTAJAAR HAI…” (I will say everything but not what you are waiting for)

It is difficult to understand why are they shying away from making a simple admission of a mistake that although it has been stated in The letter of Offer (LOO) dated July 26, 2010, that Dr. Jayaram Chigurupati can tender the shares, actually he cannot tender them in view of the CLB order dated August 3, 2010 and that even if he tenders in violation of the said order it will not be considered in terms of Letters of Offer (13 December 2007 & 26 July 2010) .

I have tried my best to get the mistake corrected but failed till now. I hope at least SEBI will not allow them to consider any shares tendered by the old promoter in contravention of CLB order and terms of Letters of Offer (13 December 2007 & 26 July 2010)

You may take whatever action you may deem proper.

MY SUGGESTIONS ACCEPTED-SAST

Some of my most significant suggestions to the SEBI committee for the review of Takeover Regulations were accepted.

SEBI had notified minimal changes in the Code –only 4. Vide notification dated November 06, 2009,
The amendment in Regulation 11 (1) is as per my suggestion.

Similarly I believe I was the first proponent of disallowing Non Compete fees. In the new draft My suggestion for disallowing Non-compete fees has been accepted.

Yet I am not happy because one of my main points – defining control & company so as to bring into the net asset sale route—Piramal, Gwalior chemicals, Orchid chemicals, Eicher motors, Zicom etc. involving G 1000+ Crs. has not been taken care of. I have brought this to the notice of SEBI time & again. I call it “THE BYPASS ROUTE TO SEBI TAKEOVER CODE”

I aired my feelings in an interview with NDTV.

You may simply click the link below to watch the interview which took place on 20 July 2010.
http://www.ndtv.com/news/videos/video_player.php?id=153390

The Businessline ( 21 July 2010) in its editorial also pointed this out as one of the three critical failures of TRAC.

GOLDEN TOBACCO

Ref. Open Offer of Golden Tobacco Ltd.

The above referred Open offer is now pending for a long time. The date of PA is 12th Nov 2009.

I wish to bring the following to your notice for further examination & necessary action for early completion/disposal of the Offer:

1. The offer is made by Mr Promod Jain and Pranidhi Holdings Pvt Ltd. Who hold 1,000 & 48,002 shares respectively, they had acquired 71,034 shares but have sold 22,032 shares (Ref: Para 1.3 of PA). The activity is trading in nature & not that of a person with serous intent to acquire.
2. PAC- JP Financial Services Pvt Ltd holds 10.9 lac shares together the acquirer and PAC hold 11.39 Lac shares or 6.47% of the equity of the target company.
3. Pramod Jain whose educational qualification is not given but his age and experience is given as 43 years and 25 years of experience in financial consultancy service. It will be interesting to find what kind of financial consultancy he was giving at the age of 18 and who were his clients.
4. Pranidhi holding although reporting losses have substantial amount as reserves. How was this reserve built up is a point to be examined. In case the reserve was built up from share premium account, who are their subscribers/share holders to take share at such hefty premium for a company who is reporting losses.
5. JP Financial is the major holder but it is not the main acquirer, it is acting only as a PAC. Why the prominent player is assuming a secondary role?
6. The objective for the offer is stated to be “ in the nature of strategic investment for diversification and growth and to reap the benefits of corporate opportunities” (Para 4.3)
7. Pranidhi holding is currently engaged in activities of investment in shares and securities and real estate projects.
8. JP Financial is engaged in engaged in activities of investment in shares and securities and providing loans and advances. JPFSPL is registered with RBI as an NBFC having Reg No: 0501828
9. It will be interesting to find whether these finance and investment companies have changed their object clause to start industrial activity for manufacturing of cigarettes.
10. Has JP Finance Informed RBI about its proposed Diversification and obtained its consent?
11. PAC has pledged 10Lac shares of Techno electric (clause 7.3) however there is not sufficient liquidity in these shares and the net worth of the acquirer is 151.25 lacs only.
12. The PAC – JP Financial not only holds More than 20 Times the number of shares held by the acquirer they have also almost entirely made the financial arrangement for the open offer. Why are they playing second fiddle as PAC rather than as an acquirer?
13. The Acquirers have time and again displayed that they are not seriously interested in the Open offer or the takeover of the company. They have resorted to this tactic for some other reason. The PA originally announced on 12 Nov 2009 has not been acted upon or pursed vigorously. From some media interview it is clear that the Open offer has been announced just to put some pressure on the management in order to settle some other score.

In the light of the above you are requested to please investigate the matter and ask the Acquirer to pursue the Open offer in an honest manner and conclude it at the earliest and in case you find that there is lack of seriousness or the actual purpose of the offer is other than what has been stated, you may ask the acquirer to withdraw the Open offer. Another significant point to be noted is that the market price of share is constantly higher than the offer price of Rs. 101/- and the Acquirers presently hold only 6.47% shares with no hope of getting any shares in the Open offer.
CC
VC CORPORATE ADVISORS PRIVATE LIMITED
SEBI Registration No. INM000011096
(Contact Person: Mr. Anup Kumar Sharma)
31, Ganesh Chandra Avenue, 2nd Floor,
Suite No –2C, Kolkata – 700 013, Ph: (033) 2225-3940/ 3941/ 4116

SPICE JET

Lptp/MYDOC/takeover/spicejet

21 June 2010

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,


Ref. Open Offer of Spice Jet Ltd.

The PA of Spice Jet Open offer is an dishonest attempt to make believe full compliance of regulations while circumventing it .

1) An illegal attempt has been made to save the foreign entity(WLR) from its legal obligation.
It is an acknowledged fact that WLR has triggered Open offer upon conversion of warrants. The PA clause 2 mentions that it is a mandatory Offer. However legal obligations of 2 separate & distinct entities have been clubbed together to This certainly cannot be allowed.
 Legal obligations cannot be compromised.
 Legal obligation is not a transferable commodity --WLR’s obligation cannot be passed on to Kal Airways Private Limited. & Mr. Maran
 2 different & distinct legal obligations cannot be merged . They have been triggered on
o 2 different dates
o By 2 different transactions
o against 2 different persons.
o Under 2 different regulations- as per PA by the Acquirers under
regulations 10 and 12 by PAC regulation 10
2) WLR has been illegally termed as Person Acting in Concert (PAC). Regulation 2(1)(e)(1) is quoted as below:
(e) "person acting in concert" comprises, -
(1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal),directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company.
The definition of Person Acting in Concert given in Regulation 2(1)(e)(i) does not fit WLR who is not acting “for a common objective or purpose of substantial acquisition of share or voting rights or gaining control over the target company” as stipulated in the regulation. Rather WLR’s objectives are just the reverse. WLR is selling and Mr. Maran & his co. are buying voting rights/control in the target company. The objective of a buyer & a seller are just the reverse of each other and by no stretch of imagination can be said to be same. WLR as such can not become Person Acting in Concert of the acquirer.
WLR, the so called PAC is not acquiring the shares, it is only the Acquirer i.e. Maran & co. who are acquiring the shares and have made all the financial arrangements.
The main objects of the Acquirer & PAC are also different. While The uundateAcquirers objective has been given as aviation services, that of PAC is Investment.

3) The undated document

PA clause 1.8 (ii) states “RHSL shall deliver or cause to be delivered to the RHSL depository participant , duly executed original undated,….(emphasis supplied). A document cannot be duly executed if it has not been dated. Moreover this practice of undated documents is highly deplorable and unethical if not illegal and should not find place in such agreements.

In the light of the above you are requested to please examine the matter in full detail and if thought fit,

a) Direct WLR to come out with an independent Open offer
b) Direct The Acquirers to remove the name of WLR as PAC
c) Direct The Acquirers to properly execute all the documents and undated executed documents should not find any place

Thanking you,

Yours truly,



Arun Goenka

THE BYPASS ROUTE TO SEBI TAKEOVER CODE GAINS POPULARITY

Orchid chemicals – a company with a market cap of about 1500 Crs. (as on close of business on 15th December 2009) was taken over for $400 Million Roughly Rs. 1860 crs.) yet no Open offer is triggered.

Incidentally this is not first such case. Orchid management has just followed other such deals. Notable amongst them is Eicher Mootrs (December 2007 deal valued at USD 350 Million) and Gwalior Chemicals (June 2009, Deal valued at Euro 82.4 Million) Such deals valued at hundreds of crores were all able to BYPASS the SEBI Takeover Rules which were promulgated to protect the interest of small shareholders.

Some small shareholder who keep an eagle’s eye on such M & A activities designed by the corporates to short change the small shareholders, did complain to SEBI but it seems that no action has been taken by SEBI resulting in encouraging more and more management to resort to such BY PASS.
Lets examine what the SEBI Takeover code says :
SEBI TAKE OVER CODE REG 12 STATES:
Acquisition of control over a company
12. Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the Regulations.

It defies any logic in all such cases. Just examine Orchid case


1. A company with a market cap of Rs.1500 Crs. Is being taken over at more than its Market cap –Rs.1860 Crs. and it does not amount to TAKEOVER?
2. If 15% of the shares were bought of the same co.—amounting to Rs. 225 Crs. –it will be take over.
3. Regulation 12 says Acquisition of control over a company—how then acquisition of control over substantial parts or whole of the company’s assets is not “ Acquisition of control” ?
4. A basic question that comes up is what is a Company? Is the BOARD ROOM a company? Or the place where the real business is done, is the company ? Sale of the business earning in hundreds of crores with about 450 employees at a price of Rs. 1860 crs. Is not a sale/ transfer of control over the company?

SEBI needs to wake up to such deals and Block the By-pass by taking immediate & firm action and directing the parties concerned to follow the Takeover code in letter and spirit. If this loophole is not plugged, soon we will have many dud or KHOKA companies listed on our exchanges.

Why would a Mylan takeover a company like Matrix and come out with an Open Offer & later delisting offer? When an easy escape route is available in the present format with SEBI not making any effort to block the BY PASS, it will be foolish not to exploit it. By buying just the assets the Acquirers takes care of 2 steps at one go—avoids making an Open offer and also subsequent delisting exercise

GREAT OFFSHORE

http://www.youtube.com/watch?v=2TDGoYErCTk
http://profit.ndtv.com/2009/12/05002531/Sebi-summons-ABG-Shipyard.html

4 December 2009
Ref. Open Offer of Great Offshore Limited by ABG Shipyard Ltd.
Sub: Recent sale of shares of Great Offshore by ABG

It was quite shocking to learn from the press that ABG Shipyard has sold its entire holding in Great Offshore on 2nd December, 2009. This is highly objectionable. Some of the grounds are as follows:

1)As per regulation 25(3) of Regulations, the competitive bidder has to make an offer for as many shares as would make his total holding equal to the holding of the first bidder after taking into account the shares already held by them together with shares proposed to be acquired in the Open offer. Based on ABG’s holding of 7.89 lacs their Open offer for 125.71 lacs shares was cleared.
Para 3 of the Letter of Offer (LOO) states as follows:

“This Offer is a competitive bid. Therefore, in compliance with regulation 25(3) of Regulations, the
Acquirer proposes to acquire 1,25,71,072 Shares of the Target Company (32.12% of Diluted
Share Capital of the Target Company and 33.85% of current share capital of the Target
Company), being together with Shares already held by the Acquirer and the PAC at least equal to
the holding of the First Bidder including the number of Shares for which the offer has been made
by the First Bidder, as of the date of the PA. The Acquirer proposes to acquire the Shares validly
tendered in accordance with the terms of the Offer at Rs.520 for each Share of the Target
Company, to be paid in cash in accordance with the Regulations in accordance with the schedule
of activities contained herein. As on the date of the PA, the Acquirer and the PAC collectively held
7,89,502 Shares of the Target Company (2.02% of the Diluted Share Capital of the Target
Company). Since the date of the PA, the PAC has further purchased 22,89,069 Shares through
open market purchases in compliance with the Regulations. Therefore, as of the date of this
Letter of Offer, the Acquirer and the PAC collectively hold 30,78,571 Shares of the Target
Company (7.87% of the Diluted Share Capital). The Offer is subject to the receipt of certain
approvals as set forth below in the section “Statutory Approvals and Other Approvals required for
the Offer”. The Acquirer will acquire all the Shares that are validly tendered in accordance with
the terms of the Offer. The maximum consideration payable under the Offer is Rs.653,69,57,440/-
(Rupees Six Hundred and Fifty Three Crores Sixty Nine Lacs Fifty Seven Thousand Four Hundred and Forty Only) ("Maximum Consideration").

Therefore the condition based on which the size of the Open offer was determined cannot be belied. After having announced the Open offer determining the size of the offer based on its holding, they cannot be allowed to sell their holding. Even if their Open offer were to be fully subscribed, their holding will not be equal to the first bidder’s initial holding i.e. 1,33,60,574 as mentioned in the LOO para 2.

2) The size of the open offer for 125.71 lacs shares itself is incorrect because as on the date of the letter of the offer, Bharati was holding 8.65 lacs shares and after the offer the holding will go upto 164.76 lacs shares therefore the offer should have been for equivalent quantity of shares. ABG should be asked to revise the offer size to 164.76 lacs shares. Even before selling the shares ABG’s total holding would have been a maximum of 156.49 lacs (page 28 of LOO), i.e. less than the stipulated no. of 164.76 lacs shares.

3) During the Offer period selling the shares of the Target company by the Acquirer is contrary to public stance of The Acquirer. SEBI in the past has come out heavily against persons who recommend buying particular shares and contrary to their recommendation were selling the shares. Rightfully, such market manipulations cannot be allowed. On one hand. ABG is creating artificial demand of the shares by announcing public offer and on the other hand taking advantage of such artificial demand and increase in prices, sells the shares.

4) Takeover Regulations provide the basis of Offer price. It should be higher or the price determined under various formulas. The basic idea is to reward the small shareholders adequately, albeit for a small portion of the capital of the co. Regulation 20(7) states that – in case acquirer buys shares after the date of PA at a price higher than the offer price than highest price paid shall be payable under offer. Similarly the highest price at which the shares has been sold by acquirer should be the offer price, since that is the price established because of the unique position of the acquirer.

5) Such sale is also illegal under insider trading regulations since the seller had the inside knowledge which was not available in the public domain that they are not serious about the open offer. The heavy price fluctuation on 2nd December is a proof of such an adverse impact. The price of Great Offshore plunged to 506 from a high of Rs. 580. ABG illegally made huge profit at the cost of small shareholders.

6) The LOO has taken yet another liberty with the Law. It has changed the definition of the term “Offer Period”.
Regulation 2 (f) "4[offer period’ means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations.];
Page 4 of LOO “Offer Period --20 day period from the date of the opening of the Offer on December 3, 2009 to the closing of the Offer on December 22, 2009 (both days inclusive)
Definition of terms legally defined cannot be changed arbitrarily?
7) The wisdom & motive of large brokerage houses who are trustees of public money, is suspect in buying such shares from one of the Competitive bidders. The trigger for price rise in the shares of Great Offshore was clearly the Competitive bid by ABG. The moment ABG was out of the race, the prices crashed from 580 to 506.
In the light of the above I strongly urge you to please investigate and take necessary actions as follows:
a) Ask ABG to revise the offer price to the highest price at which it has sold the shares.
b) Ask ABG to revise the offer size to 164.76 lacs shares.
c) Initiate enquiry against ABG for trying to mislead SEBI by declaring that it was holding a certain no. of shares and was thus obliged to come out for an offer for lesser no. of shares and not holding such shares.
d) Initiate enquiry against ABG Under Insider trading laws for illegally making profit from information not already in public domain—their intention not to proceed seriously with their Open offer.
e) The role of the Merchant Banker in allowing such an action by the Acquirer.