Italian eyewear major Luxottica Group SpA said it has decided to challenge the Securities and Exchange Board of India's ruling asking it to buy a further 20 per cent stake in RayBan Sun Optics.
"Luxottica Group considered the grounds of the decision and decided to file an appeal...believing to have valid reasons to challenge it," it said in a statement released late on Tuesday in Milan.
Sebi had earlier on Tuesday ruled that Luxottica had violated the takeover code, which requires an acquirer of more than 15 per cent in a company to make an open offer to buy an additional 20 per cent from public shareholders.
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Sebi fixed the reference date for calculating the offer price at April 28, 1999. On the basis of the average of the high and low price calculated for the six months immediately preceding this date, the offer price works out to Rs 96.35 per share.
Sebi has further directed Luxottica to pay interest at the rate of 15 per cent calculated from August 27, 1999, till the date of actual payment. This would bring the offer price close to Rs 140 per share.
In the order, Sebi chairman G N Bajpai said: "I find that the acquirer has violated regulations 10 and 12 read with sub-regulations (1) and (3) of regulation 14, as it (the acquirer) has acquired 44.152 per cent shares, voting rights and control in the target company (Rayban Sun Optics), without making a public announcement to acquire shares/voting rights or control of the target company in accordance with the regulations."
The public announcement of the open offer is to be made within 45 days of the Sebi order Bausch & Lomb (B&L) of the US had sold its sunglasses business, under the Rayban brand, to the Italian Luxottica group in 1999 for around $640 million.
B&L US had a 44 per cent stake in B&L India through a subsidiary B&L South Asia Holdings. Owing to the takeover which resulted in the merger of the South Asian entity into Luxotttica's US subsidiary, the control of the Indian company passed into the hands of Luxottica.
In September 2001, investors lodged a complaint with Sebi that Luxottica had made the acquisition which resulted in the takeover code being triggered but the company had failed to make the mandatory open offer.
Sebi called representatives of Rayban and Luxottica to provide details on the deal and also to make submissions in person. Subsequently, a show-cause notice was also served on the company on February 19, 2002.
Luxottica in its submissions said that prior to October 23, 2000, there was no definitive or enforceable agreement or obligation of purchase or merger, but only a contingent agreement to merge.
This agreement matured into an enforceable obligation only on October 23 when the spin-off transaction occured between Rayban and the Bausch & Lomb Indian subsidiary in respect of the Indian business other than the eyewear business.
It also stated that the acquisition of the control of the 44 per cent stake in Rayban took place subsequent to the merger between B&L South Asia Inc and Rayban Holdings Inc. and was, therefore, exempt from the takeover regulations.
Sebi, citing the previous case of BP Plc, held that when Luxottica announced its intention to acquire 44 per cent in Rayban by way of entering into a purchase agreement on April 28, 1999, it constituted an intention to acquire indirectly the control of Rayban and the obligation to make a piblic announceemnt arose on that date.
Sebi has also held that "the merger route was devised by the acquirer as an artifice subsequently with the intention of circumventing the captioned regulations and to avoid making of public offer to the shareholders of the target company."
Payment to the shareholders of Rayban has to be made within 30 days of the closure of the offer. The maximum time period provided in the Sebi regulations for completing the offer formalities in respect of an open offer is 120 days from the date of public announcement.