Some take-overs to be seen after issuance of ordinance

KARACHI (November 11 2002) : The corporate sector specially the Karachi Stock Exchange (KSE) is likely to see some take-overs after moving in the bureaucracy for many years, the much-required 'Take-over Law' has finally been promulgated last week, thanks to the military government.

Analysts believe that the government has rightly exercised its power at an appropriate time otherwise it may have taken months and years for the new government to frame such a law that has been opposed by many big lobbies.

The Ordinance, to provide for substantial acquisition and take-overs of listed companies, was promulgated by President Musharraf under PCO and has 4 Chapters and 31 Sections. It mainly focuses on disclosure of shareholding, substantial acquisition of shares and control and other related matters.

The Ordinance requires that the acquirer should disclose his holding if he is holding more than 10 percent of the target company's shares. If he wants his holding to exceed 25 percent then he has to make a public announcement giving an offer to acquire the required number of shares.

Similarly, if the share holding is between 25 and 51 percent then for any additional purchase the acquirer has to make a public announcement of the minimum offer price.

These legal requirements, analysts believe, will definitely create an upward speculative rally in stocks of target company. Shares of some companies are already witnessing such speculation these days and have witnessed incredible jumps.

They said that sections 7-12 provide the acquirer representation on the board immediately without waiting for the next election. Acquirer holding more than 30 percent of share holding as in case of some of the listed companies must be given proportional seats on the board as per the Ordinance, otherwise, the acquirer can call fresh elections.

Some of the major business groups are holding major portion in a few listed companies close to 50 percent, the question arises what will happen to these cases, which are pending in local courts. First of all, the said Ordinance came into force last week, so how legal advisors of these groups will interpret this law.

Secondly, as these Groups have already acquired a substantial portion of the target companies' share, what will be the status and outcome of their cases, is difficult to answer. But one thing is for sure that this law will help the said take-overs.

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