The merger between Tech Mahindra and Mahindra Satyam is finally put to rest, after the boards of both companies at their respective meetings today approved a merger of Mahindra Satyam with Tech Mahindra along with wholly-owned subsidiaries of both companies.
As per the exchange ratio approved by the valuers and both the boards, shareholders of Mahindra Satyam will receive two equity shares of face value Rs 10 each of Tech Mahindra for 17 equity shares of face value Rs 2 each of Mahindra Satyam. The merger is effective from April 1, 2012.
Tech Mahindra will issue 103.4 million new equity shares, thereby increasing its outstanding equity shares to 230.8 million and its equity capital to Rs 230.8 crore, Tech Mahindra said in a release to the Bombay Stock Exchange today.
The merger will create India’s fifth largest information technology services firm, with a combined revenue of over Rs 10,000 crore.
Mahindras own 48% in Tech Mahindra but nothing in Mahindra Satyam. However, Tech Mahindra owns a little over 42% in Mahindra Satyam via the SPV, Venture Bay Consultants.
As of December 31, 2011, M&M held 47.65% stake in Tech Mahindra. Venturbay Consultants, the SPV formed to acquire Satyam Computer Services, held 42.65% in Mahindra Satyam.
With the merger, the stake of British Telecom (BT) will come down significantly. BT’s holding, 23.20% in the company as of December 31, 2011, is expected to come down to 10-11% after the merger. BT, which has been trying to sell its stake in the company, might find more takers for its reduced stake. Last year, it had appointed Credit Suisse to look at potential suitors for its stake in the company, following which several marquee private equity players were sounded out. In fact, BT has in the past publicly stated it would look at the sale of its shareholding in the company.
Meanwhile, engineering major, Larsen & Toubro also holds 1.96% stake in Mahindra Satyam as on December 31, 2011.
In separate filings to the Bombay Stock Exchange, the two companies also said the board meeting would consider amalgamation of Satyam Computer Services along with Venturbay Consultants, C&S System Technologies, CanvasM Technologies and Mahindra Logisoft Business Solutions with Tech Mahindra, with a view to consolidating the information technology (IT)/software and related businesses and to form a single entity providing services in the sector.
In April 2009, Tech Mahindra, the infotech subsidiary of Mahindra and Mahindra, had won the bid to acquire Satyam COmputer, which was at that time India's fourth largest software exporter. Tech Mahindra offered Rs 58 for each equity share of Satyam Computer.
