After three months of the new board taking over Satyam, Tech Mahindra finally won the high profile race for Satyam. The company bid Rs 58 per share, beating rivals engineering major Larsen & Toubro and private equity (PE) major Wilbur Ross. Tech Mahindra will have to pay Rs 1,757 crore to buy the 31% stake in Satyam. The total acquisition cost will rise upto Rs 2,890 crore once it gets the mandated 51% stake.
Satyam's government-appointed board clarified that Tech Mahindra will take control only when the Company Law Board (CLB) gives its nod for the sale process. They also admitted that the crucial process of restatement of accounts would take a few more months.
Samir Arora, Fund Manager, Helios Capital, feels the model which the government adopted for Satyam could be an operating model for future scams in India. He credits the government for handling the situation deftly and swiftly without loss of jobs, confidence, or clients.
Arora feels the risk going forward will be on Tech Mahindra financing the deal.
However, JR Varma, Former Member, SEBI, said the deal has gone very well for everyone except Satyam's shareholder. "A preferential allotment to Tech Mahindra means the old shareholders of Satyam will receive less. Other than the open offer that is going to be there, they are not going to receive any money. It is not very clear whether they will benefit from the ongoing business as well."
Sudin Apte, Senior Analyst, Forrester, feels questions still persist on how the integration process will pan out. Clients, he feels, are also wondering how a company specializing in telecom will be able to service them. "Also, it is not exactly present in the domain and the lines of services of Satyam." He feels a Tier-I Indian company or a multinational could have been a better option to take over approximately a USD 2 billion company when this fiasco opened up. "I wish there was one top company who was trying to buy this company as it would have been much better for clients." According to Apte, there is going to be a possible 5-6% rationalization of staff at Satyam based on how its clients ramp up.
Restatement of co's accounts will take few months: Satyam
Finally, Tech Mahindra - IT arm of Mahindra & Mahindra - won the race for crisis-ridden Satyam. The long-drawn race finally drew to a close as it was confirmed that Tech Mahindra bid for Satyam at Rs 58 per share, while Larsen & Toubro, the other player in the fray, bid at Rs 49.50 per share.
Tech Mahindra will have to pay Rs 1,757 crore (USD 351 million) for 31% at Rs 58 per share, whereas for the total 51% stake the company will have to pay Rs 2,890 crore. The announcement of the open offer will happen within four working days of the Company Law Board (CLB) approval. Tech Mahindra will issue a public offer within 55 days of public announcement. The CLB said it will respond within 24 hours of Satyam filing affidavit.
Commenting on the same, C Achuthan Board Member of Satyam said the Satyam board will approach CLB in a day or two and the company hopes to close the Satyam sale process in 8 days.
“We will simultaneously move CLB or Sebi,” he said. “However, we need assurance from Tech Mahindra to make full payment.”
Former Chairman, Ramalinga Raju defrauded Satyam and restatement of Satyam's accounts could take a few months, Achuthan added.
Commenting on the other bidders, Achuthan said Cognizant withdrew from Satyam bid last evening. He said Cognizant and Wilbur Ross had bid separately for Satyam.
Meanwhile, commenting on the Upaid case, Achuthan said Satyam is negotiating out-of-court settlement in Upaid class action suit. “We don't expect much legal liabilities in other class action suits.”
Decision to merge at Tech Mahindra's discretion: Satyam
The mood was visibly upbeat at the Satyam Computer Services headquarters in Hyderabad where the board held a media briefing to announce the winner of the bid process — Tech Mahindra. The latter will pick up controlling stake in the scam-tainted IT company. Satyam, founded by B Ramalinga Raju, was one of India's bluechip software companies but was brought down to its knees after Raju admitted to a Rs 7,000-crore corporate scandal on January 7, a move that raised questions on the company's survival and the fate of its 50,000 employees.
Kiran Karnik, whom the government later appointed as the company Chairman, would have been a relieved man today after he steered the company through to safety and initiated a bidding process. The process was unlike any other as it involved a lot of hidden variables like the class-action suits in US and no proper books of accounts for suitors to do due diligence, a true minefield. Karnik began the briefing on a light note, his achievement allowing him the moment of light-heartedness. "This is not an official press conference, so if any journalist has shoes, please keep it with you," he quipped.
Process ahead
Karnik then got down to business and elaborated on the long-drawn bid process in which Tech Mahindra, Larsen & Toubro and Cognizant Technologies had taken part and which Tech Mahindra finally won today. “We view the deal as very successful,” he said. “Just to tell you what we been through today,” he began, “At the end of today’s process, we are announcing that the highest bidder is Venturbay Consultants, a subsidiary of Tech Mahindra.”
The chairman also gave a lowdown on the process ahead and the formalities that needed to be done to hand over the Satyam mantle to the highest bidder. “The next step is the board making a recommendation that goes to the Company Law Board, which will make its decision,” he said. “After that, when the money is in, it is indicative when the process of transfer of ownership will take place.”
Referring to the aftermath of the Satyam scam, Karnik said, “We have, as a board, tried to put out the fire and get it back on course and I am pleased to say we got it there now,” adding, “There is now a new captain to come on board and take it forward as it deserves to be taken forward in a very positive and big way.”
Accolades for all
Karnik also lauded the government for being prompt and decisive immediately after the scam broke out and also thanked Satyam’s investment bankers Goldman Sachs and Avendus, its legal advisors Amarchand Mangaldas and others. “The board also has had the good fortune of having had two advisors Homi Khusrokhan and Partho Datta, who helped us all through this process in taking us and guiding us, spending a lot of time practically hands on in the company.” Karnik also mentioned the Satyam’s customers — “the vast majority of whom chose to stay on” — and its employees.
Road ahead for Satyam
On the timeframe in which the company’s accounts would be restated, he said it could take a few months. On whether there could be a possible merger between the two companies and if the Satyam brand would stay, Deepak Parekh, another Satyam board member — also chief of finance major HDFC — said the decisions would be at the discretion of Tech Mahindra.
Tech Mahindra must win customer trust: Satyam staff
Four months after Satyam Computers’ former chairman Ramalinga Raju confessed to over Rs 7,000 crore fraud, the company has been saved. A new owner--Tech Mahindra--will now take charge of its future. Today, Tech Mahindra agreed to pay Rs 1,756 crore for a 31% stake in the company.
Parmesh Haller, Project Manager at Satyam, commenting on the today’s event said everybody is quite relieved and it is a historic day for Satyam. He added that the last three months were difficult but all along they kept focus on the key to the value creation process, taking care of customers.
Commenting on the ownership of Tech Mahindra, Subir Sarbabitya, VP-Sales, Satyam BPO said they have no apprehensions regarding their new owner. He added they are quite bullish because there is a great degree of complementarity amongst ourselves. “We do not have overlaps in clients, in verticals, so we do not see apprehensions. We only see opportunity of going forward.”
Sarbabitya further said the worst is behind them and that they are bullish that the countdown is out and it’s a happy ending and a great beginning. He expects that the Mahindra management will provide a great degree of confidence to Satyam’s customers.
While Sumeet Anand, an Ex-Satyamite, is feeling vindicated today. He said this is all because of the people and going forward also it’s the people who will define or redefine Satyam.
The biggest challenge for Tech Mahindra, Anand feels, will be to go back and show a lot of action in the first month or so to the customers who have been waiting for this particular decision of a bid or a takeover. He asserted the process actually starts now where one needs to rebuild confidence of clients and employees who have been sticking and waiting for this day to come and how do you integrate the two organizations. “The main thing”, he said “will be to show action, the need to show a lot of demonstration happening pretty soon because if that doesn’t happen the customer will first start loosing confidence.”
Abhay Gawande, Project Manager, is not too bothered whether or not Satyam should be renamed. He said at the ground levels we are the people who have overcome the crises situation very well. He added, “I would look at that particular thing as an opportunity, in the sense that if we could manage the show in the crises situation then as a team we can manage the show in any particular given situation.”
While, Sreenivasa Kalluri, Delivery Integrator, said, “The biggest challenge in the last three months was to manage and ensure that we have the delivery sustained, as it was before, and the focus for team members and as Satyam we did that.” He added they were able to retain most of the customers and Tech Mahindra, which is the strategic investor at this point of time, should send out a strong message to the customers that they are here to support the customers.
Courtesy: Moneycontrol
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