Post-CLB approval, winner to get four days to deposit money.
The banquet hall of the Taj President Hotel in south Mumbai’s Cuffe Parade is all dressed up for the occasion, with makeshift cubicles and unprecedented security arrangements. The hall will be a mute witness tomorrow to something it has never seen before — competitive bids to select the new owner for Satyam Computer Services, once India’s fourth largest software company.
The highest bidder’s name will then be sent to the Company Law Board for its approval. The Satyam board is expected to address a press conference next week to announce the winner’s name.
This means Satyam will have a new owner just over three months after its founder and disgraced former Chairman Ramalinga Raju stunned the corporate world on January 7, when he declared that he had inflated the balance sheet by over $1 billion and overstated profits “for the last several years”.
Many acknowledge that the six-member Satyam board, led by former Nasscom Chairman Kiran Karnik, has done a stupendous job in coming so close to finding a new owner for the troubled IT giant in so short a time. They roped in Deloitte and KPMG to restate the accounts and investment bankers Avendus and Goldman Sachs to advise them on the sale process; appointed A S Murty, an insider, as CEO; spoke to bankers to ensure that employees’ salaries are paid on time; and held detailed consultations with Satyam’s marquee clients to keep them on board.
Result: very few of Satyam’s 53,000 employees have left. If some major clients have exited, many more have signed up (in January alone, the company added 15 new clients and saw the departure of only one). Satyam still has over 600 clients, including General Electric, Cisco Systems and Qantas Airways.
Though tomorrow’s bidding will begin around 9 am and is expected to end after lunch time, the Satyam board is not taking any chances — the banquet hall has been booked till 6 pm.
The board members and former Supreme Court Judge SP Bharucha, who will supervise the whole process, will consider financial offers only from qualified technical bidders, who will be selected in the morning based on their governance record, mergers and acquisitions history, and their vision for Satyam’s future.
The highest financial bidder’s name will be announced if there are no bidders with a price that is less than 90 per cent of the highest bid. If there are one or more bidders who are above the 90 per cent threshold, they will be allowed to participate in a second round, along with the highest bidder. The top bidder in the second round will be the winner. In the event of a tie, there will be a tiebreaker.
The board has the capital market regulator's exemption not to set a minimum floor price, but sources familiar with the developments said the board has some figure in mind and may look at other options of raising funds in the unlikely scenario of the final bidding being below that price.
After the CLB’s approval, the winner will be given four days to deposit the money for the strategic stake and the requisite funds for the mandatory public offer in an escrow account. The strategic sale process will be completed in two phases. In the first phase the selected investor will acquire newly-issued equity shares representing 31 per cent of Satyam’s share capital, which will be followed by the public offer for 20 per cent.
Two of the board members -- HDFC Chairman Deepak Parekh and LIC Executive Director S B Mainak -- will not participate in the discussions owing to possible conflicts of interest. Parekh is on the board of Mahindra & Mahindra, the promoter of Tech Mahindra, one of the bidders. LIC is a significant shareholder in L&T which has built up a stake of about 12 per cent in Satyam, and is seen by analysts as a front-runner for taking over Satyam. The boards of both companies met today to ratify the bid price.
Just two other bidders are in the race -- Nasdaq-listed Cognizant Technology Solutions and private equity firm Wilbur L Ross. The two, however, could bid in unison. The only surprise package in the game could be the re-entry of Spice group, which had withdrawn earlier, citing lack of transparency.
All other companies, including iGate, the Hinduja group and IBM withdrew from the race due to a lack of clarity about Satyam's accounts (the company has not reported earnings after the July-September quarter because of this) and worries over liabilities from US shareholders (13 class action suits) and the $1.1 billion recovery case filed by Upaid. Also, the accounts are still being restated with the help of Deloitte and KPMG and won't be ready for months. New York-listed Satyam’s share price is down more than 90 per cent from its last year’s high of Rs 544 on the Bombay Stock Exchange.
However, one of the existing bidders said the Satyam board had tried to address the concerns somewhat by allowing bidders access to data containing “certain non-public information”, and detailed presentations made by the top management
