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Dissent over Satyam merger swap ratio

Dissent over Satyam merger swap ratio
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First Published: Sat, Jun 09 2012. 01 14 AM IST

Updated: Sat, Jun 09 2012. 01 14 AM IST
Hyderabad: Some minority shareholders of Satyam Computer Services Ltd protested against the share swap ratio they were offered in the proposed merger with Tech Mahindra Ltd before voting took place on Friday on a resolution that’s meant to clear the way for the union.
The Andhra Pradesh high court had convened a meeting of shareholders for considering the proposed combination of the two firms, with or without any modification of the merger terms. Two high court advocates, G. Kalyan Chakravarthy and N. Chandra Sekhar, who were appointed chairpersons of the meeting by the court, took note of the concerns raised by shareholders.
The shareholders cast their votes on the proposed merger towards the end of the meeting, said people who attended. The meeting was closed to the media. The ballot papers will be scrutinized in the presence of court-designated observers and a person nominated on behalf of the shareholders before the result of the vote is declared.
The boards of the two companies approved a swap ratio of two Tech Mahindra shares (face value of Rs10 each) for every 17 held by Satyam shareholders (face value of Rs2 each), while announcing the merger on 21 March. Tech Mahindra bought Satyam Computer, later rebranded as Mahindra Satyam, at an auction overseen by government-appointed directors in April 2009 after the Hyderabad-based firm was hit by India’s biggest accounting scandal.
On Friday, a few shareholders wanted the Mahindra Satyam management to wait for a few more years, by when Satyam’s stock may have gained, and then merge the two entities. This, they reasoned, would put the stockholders at an advantage.
“The merger is not fair enough. This 2:17 ratio is not reasonable,” said Ramesh Manguluri, a full-time investor with shares in over 500 firms. Another shareholder, S. Bhanukumar Raju, a financial adviser who owns over 1,000 Satyam shares, said: “The swap ratio would have been better if we had waited (for) two years more,” he said.
But, reasoned Hansa Krishnamurthy Iyengar, senior analyst at research firm Ovum’s Tools and Insight division, the timing of the merger is right. “This is as good a time as any for the amalgamation of the companies as we are clearly seeing Mahindra Satyam and Tech Mahindra leveraging their strengths in their go-to-market strategies, and this is bringing in results,” she said.
Mahindra Satyam’s chairman Vineet Nayyar told investors the board had acted on the advice of independent audit firms such as KPMG India and Ernst and Young, shareholders who attended the meeting said. JPMorgan Chase and Co. provided the “fairness opinion” on the merger to the board of Mahindra Satyam.
At least one major institutional shareholder, Infrastructure Leasing and Financial Services Ltd (IL&FS), on behalf of group company IL&FS Engineering and Construction Co. Ltd, submitted a statement alleging the management was misleading shareholders on another matter. IL&FS Engineering took over Satyam affiliate Maytas Infra Ltd.
G. Venkateswar Reddy, company secretary of IL&FS Engineering, said Maytas had lent Rs390 crore to Satyam. That was before Satyam was hit by a crisis when founder B. Ramalinga Raju in January 2009 confessed to having mis-stated the company’s accounts to the tune of Rs7,136 crore. “They have represented to the court that they have no unsecured creditors in our firm. It is factually untrue,” Reddy said. A Mahindra Satyam spokesperson said the company will respond to the statement “in the due course of time.”
yogendra.k@livemint.com
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First Published: Sat, Jun 09 2012. 01 14 AM IST