Regulation 8(1): The offer price shall be the highest of the following: (a) the highest negotiated price per share for any acquisition under the agreement attracting the obligation to make a public announcement of an open offer; (b) the volume-weighted average price paid or payable for acquisitions by the acquirer or persons acting in concert with him during the fifty-two weeks immediately preceding the date of the public announcement; (c) the highest price paid or payable for any acquisition by the acquirer or persons acting in concert with him during the twenty-six weeks immediately preceding the date of the public announcement; (d) the volume-weighted average market price of such shares for a period of sixty trading days immediately preceding the date of the public announcement, as traded on the stock exchange where the maximum volume of trading in the shares of the target company are recorded during such period.

Offer Price = HIGHEST of: (a) Negotiated price | (b) VWAP of last 52 weeks | (c) Highest price in last 26 weeks | (d) 60-day market VWAP

(a) Negotiated price per share

Reg 8(1)(a)

The price agreed with the seller in the SPA or agreement triggering the open offer. This is the price for the 'triggering acquisition' — protects sellers of control from receiving a premium while public shareholders receive less.

(b) VWAP of 52-week acquisitions

Reg 8(1)(b)

Volume-weighted average of all prices paid by the acquirer/PAC in the 52 weeks before PA. Prevents the acquirer from having bought shares at high prices in the past and then offering a lower price in the open offer.

(c) Highest price in last 26 weeks

Reg 8(1)(c)

The single highest price paid in any acquisition transaction in the 26 weeks before PA. Ensures the offer price is not below any recent transaction price.

(d) 60-day market VWAP

Reg 8(1)(d)

Volume-weighted average market price on the stock exchange with highest volume for 60 trading days before PA. Anchors the offer price to recent market reality — prevents the acquirer from offering a price lower than recent market.

Regulation 8(2): Where the acquisition is of shares of the target company through an acquisition of shares of an upstream company (indirect acquisition), the offer price shall be determined with reference to the higher of the price computed for the direct acquisition and a price determined on the basis of the proportionate net asset value attributable to the target company.

Regulation 8(3): Where any person in the open offer has agreed to receive consideration in the form of non-compete fee payable to the person from whom the acquisition is made, such consideration shall be included in the computation of the offer price.

Regulation 8(4): The acquirer may revise the offer price upward at any time up to three working days before the commencement of the tendering period.

Regulation 9: The acquirer shall pay the consideration for the open offer only in cash or by an exchange of shares or a combination of both.

Cash

Full cash consideration for all tendered shares — most common mode. Paid within 10 WD of tendering period closure.

Securities exchange

Acquirer offers own shares/other listed securities in exchange. Must be shares of a listed entity. Shareholders receive securities instead of cash.

Combination

Partly cash, partly securities. The ratio must be clearly stated in the LoO. Shareholders can choose if the LoO permits.

⚠️ Cash Payment is Default

In practice, virtually all Indian open offers are in cash. Securities exchange offers are rare — shareholders typically prefer cash certainty. SEBI requires that if any consideration is in securities, the securities must be listed and liquid.

(a) Negotiated price (SPA)

Price per share in the triggering SPA

₹200

(b) 52-week VWAP of prior acquisitions by acquirer/PAC

Open market purchases at average ₹185 over last 52 weeks

₹185

(c) Highest price paid in last 26 weeks

A block deal 20 weeks ago at ₹210

₹210

(d) 60-day market VWAP (NSE)

VWAP on NSE (highest volume exchange) for last 60 trading days

₹195

MINIMUM OFFER PRICE

HIGHEST of all above parameters

₹210 (parameter c)

✅ Key Learning from Example

The minimum offer price (₹210) is determined by parameter (c) — the highest single price paid in a recent transaction, even though the negotiated SPA price is ₹200. This protects shareholders: they receive ₹210 per share even though the selling promoter agreed to ₹200. The acquirer cannot cherry-pick the lowest benchmark — they must pay the HIGHEST of all four parameters.

Offer Price Formula — Regulation 8 SAST 2011

Model Answer — Regulation 8(1) provides that the offer price in an open offer shall be the HIGHEST of four parameters: (a) the negotiated price per share in the agreement triggering the open offer; (b) VWAP of acquisitions by the acquirer/PAC in the 52 weeks before PA; (c) highest price paid in any acquisition in the 26 weeks before PA; and (d) the 60-trading-day market VWAP on the exchange with the highest volume. The 'highest of' formula ensures shareholders receive the best of all applicable benchmarks. Regulation 8(2): for indirect acquisitions, the offer price is the higher of the direct acquisition equivalent price and the proportionate NAV of the target. Regulation 8(3): Non-compete fees and any other consideration paid to the seller must be included in the offer price — abolishing the differential treatment between the seller of control and public shareholders that existed under the 1997 Code. Regulation 8(4): Offer price may be revised UPWARD only — not downward — up to 3 WD before tendering period. Payment (Regulation 9): cash, securities exchange, or combination. Cash is the standard mode. In a worked example: if the four parameters yield ₹200, ₹185, ₹210, ₹195 respectively — the minimum offer price is ₹210.

🎯 EXAM POINTERS — Topic 49: Offer Price Determination [Regulation 8]

• Regulation 8(1): Offer price = HIGHEST of FOUR parameters. Must know each parameter.
• (a) Negotiated price — SPA or agreement price for the triggering acquisition.
• (b) VWAP of 52-week prior acquisitions by acquirer + PAC — protects against price suppression before offer.
• (c) Highest single price paid in last 26 weeks — any one transaction at highest price counts.
• (d) 60-trading-day market VWAP on exchange with highest volume — market price anchor.
• Offer price = HIGHEST of (a), (b), (c), (d) — cannot be less than any of these.
• Regulation 8(2): Indirect acquisition — higher of direct equivalent price or proportionate NAV.
• Regulation 8(3): Non-compete fee MUST be included in offer price — no differential for seller of control.
• Regulation 8(4): Offer price revision UPWARD ONLY — up to 3 WD before tendering period.
• Regulation 9: Payment in cash, securities exchange, or combination. Cash is standard.