Federal-Mogul soars 16% after SAT upholds Sebi order on open offer price

Shares of multinational company Federal-Mogul Goetze (India), or FMGI soared 16 per cent after the Securities Appellate Tribunal (SAT) dismissed an appeal against an order passed by the Securities and Exchange Board of India (Sebi) directing the promoters to revise upwards the open offer price.

Promoter US-based Tenneco had moved SAT challenging the Sebi directions on the open offer price. The mandatory 26 per cent open offer was triggered following change in ownership in the promoter group at the global level.

Based on independent valuation reports, the promoter of FMGI had arrived at an open offer price of Rs 400 per share. The market regulator had directed the promoter to revise upwards the open offer price by over 50 per cent to Rs 608.5. The market regulator arrived at a price based on valuation report submitted by Haribhakti and Company, another independent valuer.

In a petition before SAT, Tenneco had argued it was required to be heard by Sebi before making observations or passing directions on the offer price.

Following earlier directions of SAT, Sebi held a meeting with the representative of Tenneco in June to give an opportunity to explain the objection on the valuation report of Haribhakti.

Also, some minority shareholder, too, had moved SAT arguing that the open offer price should be raised to as much as Rs 1,877.

SAT also dismissed such appeals stating it didn’t find enough merit in dismissing the approach taken by Sebi to arrive at a fair valuation.

“…valuation being not a precise science and though all the parameters are required to be considered, the weight to be given to each of the parameters may depend upon the facts and circumstances of each of the case. We do not find any defect in the approach of Sebi,” SAT said in an order.

One appellant Bhavook Tripathi even alleged systematic oppression of the minority shareholders and mismanagement at FMGI to “create false negative picture”. SAT said the issue was “beyond the scope and jurisdiction” of the tribunal.

SAT, however, said the appellant had the liberty to raise the same issue before Sebi.

As the open offer price has now been revised upwards, SAT directed Tenneco to deposit the total consideration towards the offer price in an escrow account within four weeks.

Shares of FMGI rallied 16.3 per cent to end at Rs 630, compared to previous day’s close of Rs 542.