Satyam Computer Services, which had been embroiled in cases of misappropriation of company funds and fraudulent corporate practices, has announced today (April 13) that its Board of Directors has selected Venturbay Consultants, a subsidiary of Tech Mahindra, as the highest bidder to acquire a controlling stake in the company.
“On behalf of all Satyamites and their families, we congratulate Tech Mahindra on being the highest bidder,” said Kiran Karnik, who was handpicked and made the chairman of the Satyam’s Board.
Upon being declared the highest bidder, Tech Mahindra and Satyam executed a share subscription agreement today. Pursuant to the agreement, Tech Mahindra has agreed to subscribe to and acquire 30,27,64,327 shares of the company (the “Initial Shares”). This represents 31% of the share capital after giving effect to the issuance of the Initial Shares at a price of Rs. 58 per share. So it’ll infuse Rs. 1,756 crore (nearly US$ 351 million) into the company.
The trouble had begun at Satyam last year when on Dec. 16, Satyam had announced that its Board of Directors approved proposals to acquire a 100% stake in Maytas Properties and a 51% share in Maytas Infra. Maytas is engaged in infrastructure construction and asset development. The total payment for both the acquisitions was estimated to be US$ 1.6 billion – $ 1.3 billion for the 100% stake in Maytas Properties and $ 0.3 billion for the 51% stake in Maytas Infra.
On this move, Satyam’s shares had dropped by nearly 40%, as investors were angry over a technology company spending money on the construction outfit in which Satyam’s management has stake. And questions were raised about Satyam’s corporate governance.
Also, World Bank had banned fraud-laden Satyam and a couple of more Indian companies to do business with it.
As a damage-control measure, India’s Ministry of Corporate Affairs had disbanded the Satyam’s Board in January and appointed three new directors. The move was aimed to win back the confidence of shareholders, employees, and other stakeholders in the local and global markets.
As the company has been facing some severe cash crunch after the fraud was exposed, it was desperately looking for sources for funds. Selling of its stake was one of the options.
So now the Board has selected Tech Mahindra through a global competitive bidding process launched by Satyam on March 9.