What will be the open offer price for Federal-Mogul Goetze (FMG), the Indian arm of US-based MNC Federal Mogul? The Securities and Appellate Tribunal (SAT) on Thursday asked SEBI to decide on the matter in four weeks and gave three weeks time to Tenneco Inc, the acquirer of FMG, and other retail investors to raise their objections on the price.

Tenneco had given an open offer price of ₹400 a share. SEBI decided it should be ₹608.46 based on a valuation report by accounting firm Haribhakti and Company LLP. But retail investors of FMG said according to Indian peer group valuation, the open offer price should be ₹1,200 a share.

Tenneco moved the SAT and retail investors filed an intervention application.

SAT said that since Tenneceo had received the valuation report of Haribhakti and Co, it was free to raise any objections with SEBI and the regulator will have to take a call in four weeks.

Deal valuation as benchmark

Retail investors of FMG are of the view that in a recent similar open offer in the auto space involving Wabco, JP Morgan chose a valuation method that was favourable to Indian standards. Shareholders say the valuation of the FMG open offer at ₹400, offered by its offer manager CKP Financial Consultants, used only the global deal valuation to derive the Indian open offer price, which is why the offer price was low.

Shareholders say, both FMGI and Wabco were ‘infrequently traded’ within the definition of SEBI provisions, and hence, the valuation for the open offer had to be done under Regulation 8(4) of SEBI, Regulation 2011, which states than “in the event the open offer is incapable of being determined under any of the parameters specified in Sub-Regulation (3) ... the open offer shall be the fair price of shares of the target company determined by the acquirer... taking into account valuation parameters including, book value, comparable trading multiples, and such other parameters.

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