New York: Barely 48 hours before Mahindra group firm’s open offer for Satyam, the company’s government- appointed board said it decided against endorsing the offer, as this could be construed as a “negative statement” about fundamentals.
“The board believes that making a recommendation supporting the open public offer would be tantamount to recommending the shareholders to sell their holding in Satyam,” chairman Kiran Karnik said in a letter to the company’s domestic and overseas shareholders.
The letter is part of a regulatory filing by the beleaguered IT firm with the US market regulator SEC last night.
Indian conglomerate Mahindra and Mahindra’s IT arm Tech Mahindra, which last month acquired 31% stake in the scam-ridden Satyam for Rs1,756 crore, will begin accepting shares from the public shareholders from Friday under its over Rs1,100 crore open offer for additional 20% stake.
Karnik further said, “The board is concerned that this (recommending the offer) might be construed as a negative statement regarding the fundamentals of and outlook for Satyam, which could be misleading in light of the limited financial information that is available due to restated, audited financial statements of Satyam since the quarter ended June 30, 2000 being unavailable at this time.”
He further said that the purpose of the appointment of 6 government directors was “to protect the interest of stakeholders of Satyam, infuse confidence in the minds of those connected with Satyam and oversee the management of Satyam.”
Karnik also said it was a regulatory mechanism that has triggered the open offer and “the board believes its most prudent course of action regarding the open public offer is to express no opinion and remain neutral, thus permitting Satyam’s shareholders to make their own decisions regarding whether or not to participate in the open public offer.”
“Shareholders of Satyam are urged to carefully review all the information” in documents such as letter of offer, Karnik noted.
Under the offer, the shares would be purchased at a price of Rs58 a share - the same price at which Tech Mahindra got its 31% stake.
It was through a resolution passed on 3 June, wherein the board resolved that “it is expressing no opinion and is remaining neutral with respect to the open public offer,” he said.
The board’s decision not to make a recommendation with respect to the open public offer was “made unanimously by the four directors on the board” who selected Tech Mahindra’s 100% subsidiary Venturebay as the highest bidder for acquiring controlling stake in Satyam.
These directors were Karnik himself, C Achuthan, Tarun Das and T N Manoharan. Two other directors, Deepak Parekh and S B Mainak were also on the board at that time, but abstained from the decision due to possible conflict of interest.
While Parekh was on board of the controlling shareholder of one of the bidders, Mainak was executive director at a significant shareholder of another bidder.
“Due to same possible conflict of interest, these two directors also abstained from discussions and decisions regarding the making of a recommendation with respect to the open public offer,” Karnik said.
The four directors nominated by Venturbay and appointed to the board on 22 May, also abstained from such discussions.