Walt Disney Corporation who is the majority shareholder plans to acquire the shares and delist the company from the Stock exchanges where it is listed. The share has been rising steadily and the price has risen sharply from a level of Rs 386 on the 10th of February to a high of Rs 1050 on the 26th of July and a close of Rs 962.15. All this has happened when the benchmark indices have remained fairly flat. The corresponding level for the BSESENSEX on the 10th of February was 17,463.04 points which has moved up and closed at 18,197.20 points, a gain of a mere 4.20%. The scrip UTV Soft in the similar period has gained Rs 576.15 or a staggering 149.26%.

Walt Disney has informed the company and the company has informed the stock exchange of the decision to delist the company and the said notice is attached. Click here to read the notice to the stock Exchanges.

The delisting norms in India are very clear and a company has to make an offer with a floor price which is based on the weighted average of 2 weeks and 26 weeks and this becomes the minimum price to be offered for delisting. The delisting norms stipulate that the company will undertake a reverse book building and the discovered price may or may not be accepted by the company.

It appears that Walt Disney and its advisors believe that the floor price and ceiling price are the same. The company has mentioned in the letter to the exchanges under point 4 (iii) a commitment by the acquirer that the acquirer will acquire equity shares of the company at a price of Rs 1000 (Rupees one thousand only) per equity share despite the discovered price being less than Rs 1000 (Rupees One Thousand Only) per share; or and under point 4 (iv) a restriction on the board of directors of the Acquirer to subsequently approve an acquisition of shares from the public shareholders at a price in excess of Rs 1000 (Rupees one thousand only ) per equity share.

The important point to be noted is that Walt Disney is offering not only a floor price but also a ceiling price and implying that this is a price at which it will acquire any number of shares like is done in the case of an open offer. The whole deal looks again the interest of minority shareholders and SEBI the regulator should ask the company to explain its stand at the earliest.

Reverse book building implies that once the price is discovered, it is upto the company/acquirer to accept or reject the discovered price and at hat discovered price he has to accept all shares which have been tendered at or lower than that price at the discovered price. The acquirer also has to keep the discovered price open thereafter for all shareholders who have not tendered their shares.

Walt Disney appears to be circumventing the law by mixing an open offer with delisting and confusing minority shareholders. One hopes the regulator SEBI will step in and address the issue at the earliest.