Satyam Computers Ltd. announced that its board of directors has selected Venturbay Consultants Pvt. Ltd., a subsidiary controlled by Tech Mahindra Ltd., as the highest bidder to acquire a controlling stake in the company, subject to the approval of the Company Law Board or CLB. Satyam employees seem to be relieved, as the three-month saga comes to an end.
Tech Mahindra has offered Rs.58 per share for Satyam, while engineering firm L&T made an offer of around Rs.45.90 for each Satyam share and Cognizant-Wilbur Ross combine had put in their bid at Rs 20/share for the fraud hit IT co.
The Tech Mahindra bid valued the initial 31% stake in Satyam at Rs.3,886 crore. Tech Mahindra will pay a total of Rs 2,889 core for a 51% stake in Satyam.
The board under the supervision of justice Bharucha after opening the financial bid said there was no bid within at least 90% of Tech Mahindra's bid. Therefore, the board declared Tech Mahindra as the highest bidder.
Upon being declared the highest bidder, Tech Mahindra and the company today executed a share subscription agreement to acquire 3.03 million shares or 31% share capital of the company at a price of Rs.58 per share or $1.16 per share, thereby agreeing to infuse Rs.1,756 crore or $351 million (initial subscription amount) into the company.
Tech Mahindra is required to deposit the initial subscription amount and the requisite escrow amounts for the public offer in accordance with the Takeover Regulations in separate escrow accounts on or before April 21, 2009
If Tech Mahindra desires to take control of the affairs of the company simultaneously with the preferential allotment, it has to deposit in escrow the total funds necessary to consummate the public offer. In the event of Tech Mahindra failing to deposit the total acquisition funds on or before the above date, the next highest bidder will be considered the higher bidder and the Board will announce the details.
Under the Securities and Exchange Board of India Regulations, Tech Mahindra will be required to make a mandatory cash tender offer to acquire an additional minimum of 20% of the Enhanced Share Capital and convertible instruments at a minimum price of Rs.58 per share. While the public offer will be made on a worldwide basis, American Depository Share holders of the company in the US are expected to be eligible to participate in the public offer through a facility to be implemented by Citibank, N.A., the depository for the ADSs.
Pursuant to the Takeover Regulations, Tech Mahindra will be required to make a public announcement of the public offer within four working days of receiving approval from the CLB for the preferential allotment and open the public offer to tendering by shareholders and ADS holders no later than 55 calendar days after the date of such public announcement.
If, upon closing of the public offer, Tech Mahindra acquires less than 51% of the Enhanced Share Capital, it has the option to subscribe to additional newly issued shares of the company, such that the shares acquired through the preferential allotment, the public offer and the subsequent preferential allotment, if any, will not exceed 51% of the Enhanced Share Capital after giving effect to the issuance of the additional shares.
As previously disclosed, the CLB exempted the company from shareholder approval requirement in connection with the preferential allotment that would otherwise be required under the Companies Act, 1956.
The Satyam acquisition will help Tech Mahindra diversify its software services business, and compete aggressively with bigger rivals such as TCS, IBM, Infosys and Wipro. Satyam, which serves customers such as GE, GM and Ford, will also help Tech Mahindra build a better portfolio of customers.
Kiran Karnik, Chairman of the board, said, The selection of the highest bidder, in a fair, open and transparent process, signals a new stage for the company in its progress towards stabilization and growth. We hope this will infuse greater confidence and comfort amongst customers, who continue to be happy with Satyam's excellent service delivery. This event ought to dispel the anxiety of all stakeholders as its re-positions the company's commitment to revival and good governance.
Anand Mahindra, vice chairman, M&M, is expected to brief the media later in the day, sources said.
At the BSE, Tech Mahindra shares are currently trading at Rs.357.90, up by Rs.37.85 or 11.83% on a volume of 35.77 lakh shares, while Satyam share are trading at Rs.48.45 up by Rs.1.30 or 2.76% on a volume of 565.10 lakh shares.
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