The Securities and Appellate Tribunal (SAT) on Thursday upheld an open offer price of ₹608.46 a share for Federal Mougul Goetze (FMG), a company which is being acquired by global auto spare parts major Tenneco. If Tenneco approaches the Supreme Court, the retail investors too would oppose the company there, informed sources told BusinessLine .

According to the SAT order, the total open offer price will come to ₹720 a share as the tribunal has also asked the acquiring company to pay interest on delay. The interest will be charged for nearly 20 months at the rate of 10 per cent, legal experts involved in the case said. Share price of FMG gained 16.36 per cent to close at ₹631 on the BSE.

FMG open offer has been under dispute as retail shareholders of the company alleged that ₹400 a share open offer price announced by Tenneco was way lower than company’s valuation. SEBI went according to a valuation report by an expert and accepted the open offer price of ₹608.46, which now has been upheld by SAT.

Varied valuations

A slew of independent valuation reports were submitted to SEBI with regard to FMG open offer. SEBI decided it should be ₹608.46 based on a valuation report by Haribhakti & Company. Some retail investors got independent valuation done and said it should be ₹1,800 a share and submitted their valuation report. The independent valuation report from a Category 1 merchant banker engaged by a large mutual fund has derived an open offer value of ₹820 a share for FMG.

“Though appellant Tenneco and respondent SEBI are at loggerheads on the issue of valuation of shares, there is at least an agreement and rightly so, that the valuation of shares of a company is not a precise science. The conclusion arrived by expert valuer would be subjective and depend upon individual exercise.

“In the circumstances, there cannot be any indisputable single value. The target company (FMG) is a going concern but its shares are infrequently traded. In the circumstances, sub-Regulation 8(2)(e) of the SAST Regulation (of SEBI) provides a guideline for valuation of the shares. The valuation has to be carried out by taking into account valuation parameters including book value, comparable trading multiples and such other parameters as are customary for valuation of shares of such companies,” SAT in its order said.

Appeals dismissed

The tribunal dismissed all other appeals in the matter.

SEBI appointed valuer Haribhakti & Co report showed that it relied on the data of the peer set which included Bosch and WOBCO India. Tenneco’s contention was that these are not comparable companies for the reasons that their revenue is generated from different range of products.

In May, SAT had given FMG retail investors and Tenneco three weeks’ time to raise their objection with the SEBI. The Tribunal had asked SEBI to decide the matter in four weeks. SEBI stuck with ₹608.46 as the offer price, which now SAT too has upheld.

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