HP, CSC set sights on Satyam pie

10 Mar 2009

BANGALORE: Global IT firms Hewlett-Packard (HP) and Computer Sciences Corporation (CSC) are seen evaluating the possibility of acquiring a majority stake in Satyam Computer Services, even as domestic suitors L&T and Spice Group reconfirmed their interest in the beleaguered software firm. Satyam announced the timeline for a strategic sale process on Monday, exactly two months after its founder Ramalinga Raju was jailed for allegedly inflating revenue and profit.

But a few other prominent Indian business groups and companies such as the Hinduja Group and Tech Mahindra, which had initially shown interest, are still undecided. The Hinduja Group, one of the large diversified business groups, as well as IT firm Tech Mahindra may decide to stay out because of lack of adequate information.

A Reuters report from New York said that IBM may not bid for Satyam. If IBM does not put in a bid it could be because the company already has a significant presence off-shore.

In contrast, HP, which acquired EDS in 2008 to compete more effectively with rival IBM in the global software services market, could be eyeing Satyam to create a much bigger offshore delivery business. CSC could also be interested.

The two global giants are currently evaluating possibilities and it is not known if they will submit a formal offer. “Acquisitions have been a key element of CSC’s growth strategy. However, as a matter of policy, we decline to comment on rumour or speculation regarding any specific activities,” a CSC India spokeswoman had told ET recently.

Bidders need to submit their interest by March 12 (Thursday) and follow it up with a detailed expression of interest (EoI) along with the proof on availability of funds of at least Rs 1,500 crore ($ 290 million) by March 20.

There will, however, be no requirement to have a minimum floor price, which is otherwise mandatory under Sebi regulations for an initial subscription. The norm has been waived, since there is no clarity on the financials and legal liabilities of the software firm, after its disgraced founder admitted to perpetrating a Rs 7,000-crore financial fraud.

The qualified bidders will be shortlisted and given access to certain business, financial and legal diligence materials relating to the company. Information will be provided only if they have executed a non-disclosure and non-
solicitation agreement, a stand-still agreement and a ‘no-claims’ undertaking, said a company statement on Monday.

After completion of the due diligence process and execution of the pre-financial bid documents, all shortlisted bidders will be asked to submit their financial bids. Based on an evaluation of the bids, the company will select the successful bidder who, in turn, will have four days to deposit the entire subscription amount and the requisite funds for the public offer in an escrow account.
ET Bureau