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Sebi tweaks rules, stock swap may become harder
September, 23rd 2009

Market regulator Sebi on Tuesday changed some of the takeover rules that could make it harder for Indian firms to use a stock swap for an overseas merger. However, it said the changes will not apply to deals already announced.

The changes by regulator in the Takeover Code have come at a time when telecom major Bharti Airtel is trying to seal a $24-billion tie-up with South Africa's telecom giant MTN through a share-swap agreement.

Changes in the Takeover Code also made it compulsory for holders of depositary receipts to make an open offer once their holding crossed the 15% threshold limit in an Indian firm. Earlier, an open offer was triggered only on conversion of depositary receipts into shares with voting rights. The amendment will be applicable only from the day it exists,'' C B Bhave, chairman, Sebi said.

In July, Sebi had said MTN would need to make an open offer for Bharti only if GDRs were converted by the South African firm and its shareholders to local shares with voting rights. To close the Bharti-MTN deal, there were proposals for a dual listing of the companies.

However, Sebi chairman said the regulator has not received any request for permission for a dual listing.

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