The Sebi takeover panel was of the opinion that sub-clause (ii) of clause (1) of regulation 3 of the Takeover Code also covers cases where the control is effectively passed and the exemption as sought was recommended to be granted.

"It was observed that there was global restructuring resulting in forming of a holding company that is, GSK as per the scheme. It appeared that by the said scheme it is not intended to bring about change of control over the target companies in India. The indirect acquisition of the joint controlling interest of the target companies in India is purely a fallout and incidental to the global restructuring arrangements and does not change the shareholding pattern of the target companies," a Sebi release said.

Official sources said that the immediate impact is merely that the "ultimate parent company" will remain the same for the four companies."This does not mean an integration of the four companies in India. The international merger is expected to go through only by September 25," sources added.

Glaxo Smithkline Plc, a company incorporated in England, had vide an application dated June 5, 2000 to SEBI sought an exemption under Regulations 3 & 4 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 from having to make a public offer under Chapter III in respect of the four Indian listed companies.

GIL and BWIL are subsidiaries of Glaxo Wellcome plc (GW, a company registered in England). SBCHL is a subsidiary of Horlicks Limited, England which is in turn a subsidiary of Smithkline Beecham plc (SB, a company registered in England). SBPIL is a subsidiary of Eskaylab Limited (EL, incorporated in England). EL is, in turn, a wholly owned subsidiary of SB. Internationally, under the Scheme of Arrangement GW and SB would become wholly owned subsidiaries of GSK. GSK shares will be issued to the former shareholders of GW and SB in ratio 58.75 per cent and 41.25 per cent of the issued share capital of GSK respectively.

Glaxo SmithKline Plc submitted that this scheme clearly falls within Regulation 3 (1) (j) (ii) of the said regulations, the obligation to make a public offer does not apply to reconstruction including amalgamation or merger or de-merger.

It also added that all the elements of Regulation 3 (1) (j) (ii) viz. Scheme of Arrangement and merger under a recognised law (in this case English Law) are clearly met and accordingly there is no obligation to make a public offer.