SAT remits Federal-Mogul's open offer price back to Sebi

  • Sebi had asked Tenneco to increase the open price for acquiring shares of FMG India from to 608.46
  • Minority shareholders claimed FMG has exclusive patented technology solutions to meet emission norms

Shareholders of auto components maker Federal-Mogul Goetze (India) Ltd or FMG have something to cheer about as the Securities Appellate Tribunal (SAT) has referred the regulator's determined open offer price for a fresh look.

FMG India is the Indian arm of US based MNC Federal-Mogul.

The Securities and Exchange Board of India (Sebi) on 20 March had asked US-based Tenneco Inc to increase the open price for acquiring shares of FMG India from 400 to 608.46 after shareholders raised concerns.

Activist investor Carl Icahn-owned Federal-Mogul was acquired by Tenneco in a $5.4-billion deal in April 2018, which triggered an open offer for the Indian subsidiary as well. Tenneco was acquiring 1.39 crore shares or 25% stake in the Indian company.

Tenneco Inc then moved SAT against Sebi's revised open offer price as Sebi did not give them a chance to present their case. The minority shareholders who were unhappy with the open offer price also moved SAT for a fresh look. Shareholders claimed that the price was too low.

SAT remitted the matter to Sebi which did not give a hearing to Tenneco before revising the open offer. Sebi had arrived at the new price for shares based on a valuation report by chartered accountant firm Haribhakti & Co, appointed in November 2018. The petitioners have three weeks to examine the valuation report and make representations to Sebi which will thereafter have four weeks to give a final open offer price.

Minority shareholders in their appeal claimed that FMG has exclusive patented technology solutions to meet the emission norms and improve fuel efficiency.

"Taking into consideration the price the appellant Tenneco Inc has paid for acquisition of the holding company (Federal-Mogul) of the present target company in US, the offer price ought to have been Rs.6,318 per share for the reasons given in the present appeal," SAT quoted the shareholders in the order.

Tenneco Inc in its appeal said that Sebi did not give any opportunity to appellant before Haribhakti was appointed as a valuer.

"Despite the fact that two independent expert’s valuation reports were on record," Tenneco claimed.

"The respondent Sebi ought to have given an opportunity to the appellant before revising the offer price by providing material on the basis of which Haribhakti had arrived at different valuation. Then respondent Sebi should have taken decision by recording brief reasons upon consideration of the objections, if any, received from the appellant to the valuation arrived at by Haribhakti," said SAT in the order.

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