Firms join chase for 51% stake in Satyam

Reuters, March 10, 2009

BANGALORE, India: Satyam Computer Services began a bidding process Monday to sell a 51 percent stake in itself, and two potential buyers quickly confirmed that they would join the race for the scandal-tainted outsourcer.

The largest engineering firm in India, Larsen & Toubro, which controls about 12 percent of Satyam, will put in an expression of interest, but a formal bid will depend upon clarity on financial statements and the extent of Satyam's liabilities.

"It is not possible for us to say that at any cost we will bid," Y.M. Deosthalee, chief financial officer at Larsen & Toubro, told a private television channel.

Spice Group also said it would submit an expression of interest. Its chairman, B.K. Modi, said he was comfortable with the bidding rules and hoped the entire bidding exercise would be transparent. "I hope there are a lot of parties; then only there is fun in bidding," he said.

Shares in Satyam jumped as much as 19 percent in Mumbai after gaining 20 percent Friday, valuing the company at about $650 million - still just one-tenth of the $7 billion it was worth last May.

Today in Business with Reuters
To halt slide, apply debt or control?Merck agrees to acquire Schering-Plough for $41 billionA hiring bind for non-U.S. citizens and banks"Nobody would like to take a short in the dark, so the final bid price and outcome will clearly depend on the kind of information they are able to get about the company," said Tarun Sisodia, a Mumbai-based analyst at Anand Rathi Financial Services.

Satyam's government-appointed board is eager to bring in an investor to restore confidence among its among its approximately 50,000 staff members and more than 600 customers, including General Electric and Qantas Airways.

Analysts said bidders had been attracted by Satyam's strong client base and its large work force but setting a bidding price would be difficult without any audited accounts and clarity about its liabilities.

Larsen & Toubro, which also has interests in shipping and financial services, wants to buy Satyam to expand its software business, which brings in less than 10 percent of its revenue. Its challenge will be to sustain growth while spending on Satyam, said Rupa Shah, an analyst with Prabhudas Lilladher.

"There's no clarity yet on what Satyam's liabilities are," Shah said. "Also, Larsen will divert its funds to Satyam, so its planned expenditures in its core business may suffer."

Satyam said in a statement that bidders needed to submit their interest by Thursday to buy a majority stake. The bidders will then be asked to submit detailed expressions of interest and prove availability of at least 15 billion rupees, or $290 million, by March 20. Satyam said qualified bidders would then be given access to certain business, financial and legal materials before submitting a bid.

Satyam has been struggling for survival since its founder and chairman, B. Ramalinga Raju, said in January that Satyam's profits had been overstated and its assets falsified for years in what has become India's biggest corporate scandal. Raju quit and was later arrested, as were his brother, B. Rama Raju, the company's managing director, and Srinivas Vadlamani, its chief financial officer.