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Fresenius plans to delist 7 months after OFS, raises concerns over Sebi norms ’violations’
Source : The Economics Times Date : 17 Apr 2013  
MUMBAI The move by the promoters of drugmaker Fresenius Kabi Onoclogy (FKOL) to delist the shares of the company seven months after making an offer for sale (OFS) has raised questions about the timing of such buybacks. The parent of FKOL, Singapore-based FreseniusBSE -1.68 % Kabi (Singapore), (FKSL), announced on Wednesday that it proposes to buy back the 19% stake held by the public at Rs 130 a share and take the company private. This price values the Indian drugmaker atRs 2,057 crore. The move comes seven months after the promoters sold 9% through an OFS, reducing their holding to 81% in partial compliance of the market regulator’s rules mandating minimum 25% public holding in all listed companies. Sebi rules stipulate that companies do not sell or buy their shares for 12 weeks from the date of completion of their OFS. FKSL, lawyers and experts say, is well within its rights to complete the delisting as it comes seven months after the OFS. But the timing of the announcement is likely to cause heartburn among investors and raise questions about whether the spirit behind Sebi’s minimum public shareholding norms is being violated. Securities law experts said that the 12-week gap for buying and selling shares is too short. "This (FKSL’s delisting offer) does not go against the law, however a one-year gap between OFS and delisting is desirable," said MS Sahoo, a former Sebi member. JN Gupta, ex-Sebi official and now managing director of SES, a proxy advisory firm, said that Sebi should undertake from the companies that they would not delist for at least three years after an OFS. Sebi norms provide for the delisting of a company’s shares if the promoter stake crosses 90% or if the promoter acquires at least 50% of the nonpromoter shares, whichever is higher. In the case of Fresenius, the promoter holding before the OFS in October last year was 90% and a delisting would have required the promoter buying about 5% from the public. That percentage has now increased to just over 9.5%. The October OFS was largely subscribed to by Pnote holders. If the holders decide en masse to sell the shares in the delisting offer, the promoter will only have to buy half a percent from the public. Indian and foreign companies have been given time till June this year to raise their public shareholding to 25% of their equity capital. Many of these companies have complied with the Sebi norm though there are exceptions such as Gokaldas ExportsBSE 0.00 % and GilletteBSE -0.55 % which have claimed that their promoter holding level is less than the stipulated 75%. Fresenius was trading at a high ofRs 173.40 last year on hopes of delisting but crashed to Rs 78 after the OFS. On Wednesday, it ended atRs 134.20, 5.6% higher from the previous close.

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