Supreme Court Notice To Pegasus Holdings On SEBI's Appeal Over Federal-Mogul Goetze Shares

Supreme Court Notice To Pegasus Holdings On SEBI's Appeal Over Federal-Mogul Goetze Shares

The matter will be heard on 24 April

The Supreme Court has issued a notice to Delaware-based Pegasus Holdings III, LLC after the Securities and Exchange Board of India (SEBI) appealed challenging the decision of the Securities Appellate Tribunal (SAT).

The SAT had overturned the market regulator's order to appoint an independent valuer for Federal-Mogul Goetze (India) shares.

In December, the SAT upheld the price of the offer suggested by Pegasus. It held that SEBI incorrectly applied Regulation 8(16) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 exercized its power to appoint a valuer.

A bench led by Justice BV Nagarathna sought response from Pegasus on SEBI’s appeal against the SAT's order appointing an independent chartered accountant for valuation, even though the shares were determined on the average price for 60 days.

In 2022, Pegasus agreed to acquire parent organization Federal-Mogul’s company, Tenneco, which is listed in India.

Pegasus ascribed Rs.275 per share of FMG at a premium to the 60-day’s volume-weighted average market price of Rs.236. The price was revised to Rs.295.65.

However, SEBI refused the value of FMG shares and appointed M.M. Nissim & Co LLP for valuing the Net Asset Value.

Pegasus approached the SAT challenging SEBI's 30 August 2023 communication conveying the appointment of the valuer.

Appearing for SEBI before the apex court, senior counsel CU Singh and counsel Amarjit Singh Bedi argued that Pegasus' offer price was ‘arbitary’. Therefore, the independent valuation of the company’s shares was required as it failed to furnish the valuation data.

Representing Pegasus, senior counsel AM Singhvi opposed the appeal. He requested the court to direct SEBI to proceed with the open offer. He stated that if SEBI won, the company was willing to pay the balance.

SEBI submitted that the SAT failed to appreciate that in the case of indirect acquisition of the company, six methods were prescribed in Regulation 8(3)(a) to (f) and the open offer price was the highest. Regulation 8(3)(f) provided for per share value computed under Regulation 8(5).

It added that as per Regulation 8(5), the acquirer had to compute and disclose in the letter of offer the 'per-share value of the company' for acquisition, along with a 'detailed description of the methodology' adopted for computation, in which Pegasus failed.