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Castrol bidders told to hike offer price to Rs 350.08 per share

BS Markets Bureau

The Securities Appellate Tribunal has ruled that the UK-based BP Amoco Plc and Castrol Ltd should raise the price for the public offer for Castrol India shares from Rs 311.91 to Rs 350.08 per share.

The ruling sets a legal precedent for determining the relevant date for calculating the price of an open offer made for an Indian company when its parent company abroad is merged into or taken over by another company.

According to the "chain rule" in the Sebi takeover code, it amounts to an indirect acquisition of the India company and thus, calls for an open offer.

The SAT ruling specifies that in such cases, the relevant date will be the day when the intention to merge or acquire is announced.

Dismissing an appeal by the two companies against the Sebi ruling to raise the offer price, the C Achutan tribunal said the relevant date for calculating the offer price for shares of Castrol India should be March 13, 2000 when BP Amoco Plc announced its intention to take over Burmah Castrol (the parent company of Castrol India) and not July 7, 2000 when the international takeover actually took place.

The two UK-based companies had contended that the relevant date for calculating the price should be July 7, 2000 when the global merger was effected.

The date becomes relevant as under the Sebi takeover regulations, pricing of the open offer should be based on the average price in the six months, prior to the public announcement.

Achutan, in his judgement, observed: "the acquisition of control over Castrol India Ltd by BP Amoco and Castrol Ltd was consequential to the acquisition of the shares of its ultimate holding company viz. Burmah Castrol Plc. It is, therefore, a case of indirect acquisition of control attracting provisions of regulation 12 of the takeover code."

Noting that the regulation requires the acquirer to make a public offer for acquiring shares of the target company, the tribunal said: "It is clear that making the public announcement is not a post-acquisition requirement, but a pre-acquisition requirement.

"In the light of such a clear requirement, it is difficult to subscribe to the appellant's view that its obligation to issue public announcement arose only on completing the acquisition on July 7, 2000."

Achutan ruled that March 14, 2000 should be date for calculating the price as on that date BP Amoco made a press announcement on its intention to acquire Burmah Castrol.

On December 11, 2000, Castrol UK and Burmah Petroleum announced their intention to make an open offer to the shareholders of Castrol India Ltd for 20 per cent of its capital at Rs 311.91, based on the cut-off date of July 7, 2000.

The companies filed the offer document with the Sebi, following which the regulator ruled that the relevant cut-off date should be March 14, 2000.

After the announcement of international merger on March 14, 2000, the price of Castrol India declined and so average price if calculated as on July 7, 2000 was lower than that calculated on price prior to announcement.

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