Satyam takeover talk bubbles; L&T seen as favourite

Mon Feb 2, 2009
Indian newspapers have said the Securities and Exchange Board of India is expected to consider relaxing takeover pricing rules for Satyam, and perhaps set the offer price on a shorter period..

Currently, the 26-week average price would work out to an offer price of about 255 rupees, according to Thomson Reuters data, versus Friday's close of 54 rupees. An average price over 10 days would work out at about 38 rupees.

U.S.-based outsourcer iGate and India's Spice group, among others, have expressed interest to buy Satyam, attracted by the firm's global clientele such as General Electric and Nestle and bankers say L&T was unlikely to shy away from a bidding war.

"If any of the bidders look to build half of Satyam's business, it would take them 5 years. Right now, they are looking purely at cash accretion to their existing businesses," said Sanjeev Patkar, head of equities at Dolat Securities.

Last week, Satyam said fund manager Fidelity raised its holding in the company to 6.8 percent and since then Fidelity has increased its stake further.

Bankers say foreign takeover interest is limited in Satyam given the lack of clarity on the company's books, and a number of class action lawsuits filed by U.S. shareholders.

COMMITTED BUYER

Funding is unlikely to be a problem for L&T. Its senior vice-president for finance R. Shankar Raman said last week L&T had cash and cash equivalents of $920 million at the end of 2008.

Add in its existing sizeable stake, a strong brand image and relationships with domestic institutions and funds that owned more than 15 percent of Satyam late last year, and bankers say L&T is well placed to see off other bidders.