Definition
A public offer made by an acquirer to all shareholders of a listed company — required under SEBI Takeover Regulations when an acquirer crosses specified shareholding thresholds — to purchase at least 26% of the total shares at a regulated minimum price.
An open offer is the mandatory offer triggered under the SEBI Takeover Code when: (a) an acquirer crosses 25% voting rights ('trigger threshold'); (b) a shareholder already above 25% acquires more than 5% in a financial year ('creeping acquisition'); or (c) an acquirer acquires control directly or indirectly. The open offer must be for a minimum of 26% of total share capital. Key procedural steps: Public Announcement (PA) → Detailed Public Statement (DPS) → Escrow deposit (to secure payment) → Tendering period (10 working days) → Payment within 10 working days of tendering closure. During the open offer, the target company's Board is restricted from taking certain defensive actions that would frustrate the offer.
Statutory Definition
Regulation 7(1), SEBI Takeover Regulations, 2011: 'Subject to regulation 8 of these Regulations, the acquirer shall make a public announcement to acquire from all the public shareholders, as of the identified date, at least twenty-six percent of the total shares of the target company as of the tenth working day from the closure of the tendering period, at a price not lower than the price determined in accordance with the provisions of sub-regulation (1) of regulation 8.'
Etymology & Origin
From 'open' (available to all, unrestricted) + 'offer' (a proposal to buy at a stated price). An 'open offer' is an offer 'open' to all shareholders — unlike a negotiated deal with only the promoter, every public shareholder has the right to participate.
Full Legal Analysis
Open Offer: The Exit Right for Public Shareholders
The open offer is the SEBI Takeover Code’s core mechanism for protecting minority shareholders. When control of a listed company changes hands, public shareholders who may not want to remain under the new controller must have the right to exit — at a fair price. The open offer is that exit: a mandatory opportunity for all public shareholders to sell their shares to the acquirer at a regulated minimum price.
The Open Offer Process
(a) Public Announcement (PA): Issued within 2 working days of the trigger event — announces the intent to make an open offer and gives preliminary details. (b) Detailed Public Statement (DPS): Within 5 working days of PA — detailed terms, price, and process. (c) Escrow deposit: The acquirer deposits 25% of the total open offer consideration in an escrow account with a banker — security for payment. (d) SEBI comments: SEBI reviews the DPS and may comment within 15 working days. (e) Letter of Offer: Dispatched to all shareholders after SEBI's comments are addressed. (f) Tendering period: 10 working days for shareholders to tender (sell) their shares. (g) Settlement: Payment within 10 working days of tendering closure.
Price Determination
The open offer price — the mandatory minimum — must be the highest of: (a) the negotiated price with the seller (the promoter price); (b) VWAP of the shares over the last 52 trading weeks; (c) the price paid by the acquirer for any acquisition in the 26 weeks preceding the PA; and (d) the highest price paid by the acquirer and persons acting in concert in the last 52 weeks. This four-part 'highest of' formula ensures public shareholders get the same or better price than the promoter.
“The open offer is the market’s contract with the retail investor: you can buy shares in a company without fear that a change of control will trap you. If the company’s ownership changes, the law guarantees you an exit at a fair price. The open offer gives substance to this promise.”
This Term in Indian Statutes
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, 2011
"The acquirer shall make a public announcement to acquire from all the public shareholders at least twenty-six percent of the total shares of the target company at a price not lower than the price determined in accordance with the provisions of regulation 8."
Open offer: mandatory offer to all public shareholders for 26% of shares at highest-of price; escrow security; 10-day tendering period
