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India’s Tech Mahindra wins Satyam bid

Posted in Uncategorized by malaysiasms on April 13, 2009

satyam_0MUMBAI: India’s Tech Mahindra won the bidding Monday for Satyam Computer Services in a sale aimed at giving the scandal-hit outsourcing giant vital capital and a new beginning.

The mid-level outsourcing firm will have to pay nearly 600 million dollars for a majority share of Satyam, which has struggled since its founder earlier this year confessed to staging India’s biggest accounting fraud.

Satyam said in a statement the news “signals a new stage for the company.”

The firm, which was India’s fourth-largest outsourcer by revenues when the scandal broke, acts as back office for some of the world’s biggest manufacturers, health care providers and banks.

The spokeswoman for Hyderabad-based Satyam said Tech Mahindra put in the highest offer among the sealed bids opened earlier in the day by the company’s government-appointed board.

“Tech Mahindra has won the bidding at 58 rupees ($1.16) a share,” she told AFP.

The offer represents a 23 percent premium to Satyam’s last closing share price and would mean Tech Mahindra would have to pay about 29 billion rupees ($581.3 million) for a 51 percent stake.

In January, founder B. Ramalinga Raju admitted faking a billion-dollar bank balance and inflating the company’s profits.

Raju, his brother and seven other people, including two Price Waterhouse India auditors, are now being held on charges of conspiracy, cheating, forgery and falsification of accounts.

The new board was appointed by the government after the confession.

Tech Mahindra beat Indian engineering heavyweight Larsen & Toubro, which already had a 12 percent stake in Satyam and was seen as a front-runner for Satyam. It bid 45.90 rupees a share.

“The selection of the highest bidder, in a fair, open and transparent process, signals a new stage for the company in its progress towards stabilisation and growth,” Satyam said in a statement.

The sale had taken on an urgency, with dozens of clients reported to have terminated their contracts or planning to defect to Satyam’s rivals because of the uncertainty over its future.

“This event ought to dispel the anxiety of all stakeholders as it re-positions the company’s commitment to revival and good governance,” said Satyam board chairman Kiran Karnik.

The company was “in deep trouble. We doused the fire and brought it back on course,” he told a news conference.

Shares of Tech Mahindra, which is based in the western city of Pune, were up 46.15 rupees, or 14.68 percent, at 362.25 rupees following the announcement.

The firm is majority owned by Mahindra and Mahindra, one of India’s top 10 industrial houses, in partnership with British Telecommunications Plc.

Satyam shares climbed 3.15 rupees, or 6.68 percent, to 50.30 rupees but were still well down from their 2008 peak of 544 rupees.

According to the sale process, Tech Mahindra will buy 31 percent of Satyam and then make an open offer on the share market for another 20 percent of the firm.

The board, advised by investment bankers Avendus and Goldman Sachs, had said it wanted a buyer that had a viable operating plan for Satyam.

Tech Mahindra has 23,000 employees, less than half Satyam’s head count of 48,000 that includes contract workers.

The sale attracted just a few contenders because of deep uncertainty over its accounts and worries about liabilities from US shareholder and other suits. Accounts are still being restated and will not be ready for months.

Satyam has been scrambling to pay salaries and other expenses and needs a cash infusion to help stay afloat.

It operates in close to 70 countries and has nearly 700 clients, including about 185 Fortune 500 firms such as Nestle SA. (By SALIL PANCHAL/AFP)

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