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Sebi sitting on 11 cases of takeover code violations

BS Markets Bureau in Mumbai

The Securities and Exchange Board of India is still sitting on around 11 cases of violations of the takeover code where the acquirers, mostly multinational corporations, have not made the mandatory open offer due to their acquisition of a controlling stake in their Indian subsidiaries.

The aggregate value of these open offers is estimated at around Rs 15 billion. And if the interest on that amount is factored in, it could be more than Rs 20 billion.

Among the firms that are expected to make open offers are Colour-Chem, Seamec, FAG Precision Bearings, Hathway Bhawani Cabletel, and Datacom.

"There was an indirect change in management in Colour-Chem, Seamec (formerly Peerless Shipping) and Foseco," a merchant banker said.

Recently, the Sebi Chairman, G N Bajpai, had announced that open-offer cases would be resolved soon. Sebi officials said a lot of care was needed in these cases as they involved a lot of legal issues which had to be sorted out.

The final hearings for Technip Group, of France, and Colour-Chem are slated for August 9, after which a combined decision on these is expected to be issued. It is estimated that the overseas parents of Colour-Chem and Technip Group will have to remit about Rs 1.40 billion and Rs 1.72 billion, respectively.

After nearly a year of investigations, today Sebi ordered Luxottica group, of Italy, to make an open offer to the shareholders of Ray Ban Sun Optics.

In the case of acquisition of Castrol by BP-Amoco, the capital markets regulator ordered the latter to make an open offer to the shareholders of Castrol. Also, the Sebi order to BP-Amoco to pay interest on the delayed payment to Castrol's shareholders was upheld by the Bombay High Court.

Similar is the case of Seamec, whose parent will have to shell out about Rs 1.72 billion. Technip's acquisition of Seamec is significant. Technip had acquired a 29.7 per cent stake in Coflexip Stena Offshore from Stena International sometime in April 2000. Technip made an open offer in July 2001 to the minority shareholders of Coflexip Stena. With this, Technip also got indirect control of Coflexip Stena's 58.2 per cent stake in its subsidiary Seamec.

Therefore, the takeover code was effective in this case, and an open offer had to be made. However, Technip has so far not made any open offer. The company's version is that the open-offer price should be Rs 77.62, based on the average market price during the six months from July 2001.

However, the management changed in April 2000, corroborated by the directors' report for the year ended December 2001. The share price then was Rs 203 and the Sebi's view is that the open offer has to be made at this price.

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