Satyam details tight process to select majority investor

March 10, 2009

Hyderabad-based Satyam Computer Services has started a competitive bidding process to select an investor who will acquire a majority (51 per cent) stake in the troubled IT services company. The process will be overseen by either a former Chief Justice of India or an ex-Supreme Court judge.


Under the process proposed by the government-appointed Satyam board, each entity has uptill 5pm on March 12 to register interest in the bid. All those who validly do so will be sent a request for proposal (RFP) shortly after and asked to send a detailed expression of interest (EoI) with proof of availability of funds of at least Rs 1,500 crore ($290 million) by 5pm on March 20.

Eligible bidders will be shortlisted and given access to certain business, financial and legal material relating to Satyam.

“After completion of the due diligence process and execution of pre-financial bid documents, all shortlisted bidders will be asked to submit their financial bids and an executed copy of the share subscription agreement. The successful bidder will have four days to deposit with the company the subscription amount and the requisite funds for the public offer in an escrow account,” said a company statement. The process is expected be over in five or six weeks.

Among those expected to participate are Larsen & Toubro (L&T), which owns 12 per cent in Satyam and has expressed an interest in taking management control; global IT giant IBM; the BK Modi-owned Spice group, which has also said that it wants management control; Tech Mahindra; and the Hinduja group.

After the selection of the successful bidder, Satyam will be required to approach the Company Law Board and the Securities and Exchange Board of India (Sebi) for approval, after which the successful bidder will be allowed to consummate the subscription.

Satyam said that after the deposit of the entire subscription amount by the selected investor with the company and the requisite funds for the public offer in the escrow account as required under Sebi’s takeover regulations, the investor would be required to make a mandatory public offer to buy a minimum of 20 per cent of the company’s enhanced share capital.

The public offer will be made at the same share price as the price paid by the investor for the initial subscription. If upon the closing of the public offer, the investor would have acquired less than 51 per cent of the enhanced share capital through the initial subscription and the public offer, he would have the option to subscribe to additional newly-issued equity shares. The subsequent subscription, if any, will be required to be completed within 15 days of the closing of the public offer.

Spice Group Chairman BK Modi told PTI his company would bid for Satyam. “It’s a good thing that the bidding is taking place through the internet and there is no floor price,” said Modi.

A spokesperson of the L&T group said: “We will submit an expression of interest (EoI) by March 12. But the decision on whether we bid will depend on the quality and the quantity of information made available.”

Prabal Banerjee, Group CFO, Hinduja group, said: “We are reviewing the process and should be able to arrive at a decision in the next couple of days.”

“We are yet to take a view,” said a Tech Mahindra spokesperson.