Satyam gets strategic investor, fresh lease of life (Roundup)

April 13th, 2009 - 7:02 pm ICT by IANS  

Manmohan Singh Mumbai, April 13 (IANS) The government-appointed board of Satyam Computer Services Monday named the winner of the auction to sell a majority stake in the IT bellwether, just three months after it got entwined in corporate India’s worst frauds, bringing cheer to some 48,000 employees and more than 300,000 shareholders.
The quick board action to approve the bid by Tech Mahindra to acquire 31 percent stake in Satyam for Rs.1,756 crore (Rs.17.56 billion/$351 million) at Rs.58 per share, won praise not just from India Inc, but also Prime Minister Manmohan Singh, who had once called the fraud a “blot” the country’s corporate governance.

Tech Mahindra, which is acquiring Satyam through its subsidiary Venturbay Consultants, will make an open offer for another 20 percent stake in India’s fourth largest software exporter at Rs.58 per share for the controlling stake (51 percent).

The board will inform the Company Law Board (CLB) of the development. The CLB approval is expected in a week, and the open offer has to be made within 55 days of that.

In Mumbai Monday, the prime minister expressed satisfaction at the manner in which the whole episode was handled, saying: “I am confident that our regulatory system has the resilience and strength to ensure that no such Satyams ever take place.”

India Inc was also quick to react. “This is probably one of the fastest cases where there has been a change in ownership through a structured process,” said Harshpati Singhania, president, Federation of Indian Chambers of Commerce and industry (FICCI).

“The smooth completion of the bidding process for Satyam demonstrates that India has an adequate legal and institutional mechanism for handling and resolving a major corporate crisis,” Singhania said.

Added the Associated Chamber of Commerce and Industry of India (Assocham): “Satyam will move towards stabilisation, its market value will get stabilised, benefiting both its clients, employees and all stakeholders.”

The development has come as a big relief for Stayam’s huge workforce and investors. “The agony of wondering what lies ahead is over. The past three months were horrible,” a Bangalore-based Satyam employee said, seeking anonymity.

At the Bombay Stock Exchange, shares of Tech Mahindra soared 12.31 percent to close at Rs.359.45, after having risen almost 25 percent to touch an intra-day high of Rs.400.

The Satyam scrip jumped about 16.43 percent to touch an intra-day high of Rs.54.90 but slipped as the day progressed to settle a modest 3.61 percent above its last closing figure at Rs.48.85.

The government-appointed six-member board met here earlier in the day to select the strategic investor. Two directors, Deepak Parekh and S.B. Mainak, however, abstained from the decision to select Tech Mahindra. Parekh sits on the board of parent Mahindra and Mahindra, while Mainak is the executive director of a significant shareholder of another bidder.

Under the share subscription agreement signed by the winning bidder and the board, Tech Mahindra will have to deposit the bid amount in an escrow account by April 21.

Subscribers of the Hyderabad-based Satyam’s American depository shares will also be eligible for the open offer at $1.16 based on the exchange rate of Rs.50 to $1 within 55 days.

Engineering major Larsen and Toubro (L&T) and consortium of Wilbur Ross-Cognizant were the other two bidders, with the B.K. Modi-owned Spice group having withdrawn from the bidding process earlier.

The global competitive bidding process, initiated March 9 in accordance with the CLB and the regulatory body - Securities Exchange Board of India (SEBI) - was supervised by former Chief Justice of India S.P. Bharucha.

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