Original source document can be found at: http://www.sebi.gov.in/cmorder/lifestyle.html
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SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED INDIRECT ACQUISITION OF SHARES OF LIFESTYLE FABRICS
LTD. - EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS)
REGULATIONS, 1997
1.0 BACKGROUND
1.1Arvind Brands Ltd. (hereinafter referred to as 'the acquirer) is a public
limited company incorporated under the Companies Act, 1956, having its
registered office at Arvind Mills Premises, Naroda Road , Ahmedabad -
380025. The acquirer and Asman Investments Ltd. are 100% subsidiaries of
Arvind Mills Ltd. The said Asman Investments Ltd. is holding 71.80% equity
shares of Lifestyle Fabrics Ltd. (hereinafter referred to as the target
company).
1.2The equity shares of the target company are listed at Bombay Stock Exchange
Ltd., Delhi Stock Exchange Association Ltd., Ahmedabad Stock Exchange Ltd.,
Calcutta Stock Exchange Association and Bangalore Stock Exchange Ltd. The
acquirer proposes to acquire 39,200 equity shares of Asman Investment Ltd. from
Arvind Mills Ltd., the parent company. The said 39,200 equity shares accounted
for 49% of the said Asman Investments Ltd. Pursuant to the said proposed
acquisition, the holding of Arvind Mills Ltd. in Asman Investments Ltd. would
reduce from 100% to 51%.
1.3The proposed acquisition of 49% equity shares of Asman Investments Ltd., by
the acquirer from Arvind Mills Ltd. would lead to the indirect acquisition of
shares of the target company, which would trigger the provisions of Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations, 1997 (hereinafter referred to as the Takeover Regulations).
2.0APPLICATION FOR EXEMPTION
2.1The acquirer vide letter dated February 12, 2007 filed an application under
Regulation 4(2) of the Takeover Regulations seeking exemption from the
provisions of Regulations 10, 11 (1), 11(2) and 12 of Chapter III of Takeover
Regulations with respect to the proposed indirect acquisition of the shares /
control of the target company. In the said application, the acquirer inter alia
made the following submissions:
a. All the companies viz. The Arvind Mills Ltd., Asman Investments Ltd., the
acquirer and the target company are part of Lalbhai Group.
b. The acquirer does not hold any shares directly in the target company.
However, it has made disclosures under regulation 8(2) of the Takeover
Regulation as one of the promoters of the target company.
c. For strategic reasons and particularly with a view to focus on the core
business activity i.e. manufacturing and selling garments, it has been decided
by the management of Arvind Mills Ltd. to divest its investment portfolio in
such a manner that the ultimate control remains is preserved with the flagship
company i.e. Arvind Mills Ltd.
d. There will be no change in the ultimate ownership or control over the Target
company .
e. Since the group companies have been exercising control over the target
company, it would not affect the interests of the public shareholders of the
target company.
f. The acquirer is one of the promoters of the target company along with other
promoter group companies belonging to Lalbhai Group.
g. The proposed acquisition is an internal arrangement amongst the promoters of
the target company. The proposed acquisition is for the purpose of consolidation
of the shareholding of the target company in the specific promoter group
company. The acquirer further submitted that, even though as a result of the
proposed acquisition there would be no change in the management and control of
the target company and in its status, as the acquirer continued to be promoters
of the target company, technically it might be possible to construe that there
would be indirect acquisition. Accordingly the application is made.
h. The share market value of the target company is not going to be affected by
the proposed acquisition. The proposed acquisition would not cause any loss or
prejudice to any of the shareholders of the target company.
i. In view of the growing economy, inter alia the parent company (Arvind
Mills Ltd.) proposed to transfer part of its investments held in Asman
Investments Ltd. to the acquirer without effecting any kind of change of control
of two listed subsidiary companies.
3.0 RECOMMENDATION OF THE TAKEOVER PANEL
3.1 The aforesaid application dated February 12, 2007was forwarded to the
Takeover Panel by SEBI in terms of sub-regulation (4) of regulation 4 of the
Takeover Regulations. The Takeover Panel, vide report dated March 6,
2007(forwarded to SEBI vide letter dated March 20, 2007) has recommended as
under -
"Arvind Brands Ltd. and Asman Investments Ltd. are 100% subsidiary of Arvind
Mills Ltd. and Asman Investments Ltd. is holding shares in various group
companies including Arvind Products Ltd. and on the date of application Asman
Investments Ltd held 39,49,093 equity shares/voting rights constituting 71.80%
of Lifestyle fabrics Ltd.
As a result of the proposed acquisition the acquirer would indirectly acquire
shares/voting rights and control of Arvind Products Ltd. The Panel has
considered the case of Arvind Products Ltd. proposed to be acquired by Arvind
Brand Ltd. and for the reasons stated therein the panel does not find difficulty
in granting exemption sought for."
4.0 FINDINGS
4.1I have carefully considered the application dated February 12, 2007 filed by
the acquirer, the above mentioned recommendations of the Takeover Panel and
relevant materials available on record.
4.2 In the present case, the acquirer and Asman Investments Ltd are 100%
subsidiary of Arvind Mills Ltd. The acquirer proposes to acquire 49% of the
equity shares of Asman Investments Ltd. from Arvind Mills Ltd., the parent
company. Thus, the acquirer would indirectly acquire the shares of the target
company. At present, the parent company (Arvind Mills Ltd.) is controlling the