New Delhi: It’s a deal running into thousands of crores of rupees, but the bank entrusted with safekeeping of Tech Mahindra’s payment for buying out scam-hit Satyam Computer will be paid just Rs1,000 as its fee.
As per the deal reached between the two parties, Tech Mahindra has agreed to deposit Rs1,756 crore in an escrow account towards the purchase of shares amounting to a 31% stake in Satyam.
Pursuant to their agreement, which has also been approved by the Company Law Board, Satyam and Tech Mahindra have jointly appointed Hongkong and Shanghai Banking Corporate Ltd (HSBC) as the ‘escrow agent’ for safekeeping of this payment.
As part of the agreement with HSBC, the global banking major would open a “no-lien, non-interest bearing account in the name of Satyam-Bidder Escrow Account.” In M&A deals, such accounts are meant for safekeeping of payments made by the bidder till the time the deal is closed, after which it is released to the other party.
“In consideration of undertaking the obligations under this agreement, the escrow agent shall be entitled to receive an amount of Rs 1,000 (one thousand only) as its fees (escrow fee)” solely by the bidder, says the agreement.
Besides, a delayed payment of escrow fee would not entitle HSBC, which has agreed to open such an account at one of its Indian branches, to terminate the agreement.
HSBC’s sole responsibility would be ”for the safekeeping and disbursement” of Tech Mahindra’s payment for a 31% equity in Satyam “and to the extent that such disbursement shall not cause the escrow account to become overdrawn.”
The agreement mandates that the account should be opened specifically for the purpose of Tech Mahindra’s payment for 31% equity purchase in Satyam through a preferential allotment of shares and both the companies would have to comply with all the ‘know your client (KYC)’ norms of HSBC.
HSBC can terminate the agreement with a 15-day notice if KYC documents submitted by Satyam and Tech Mahindra were not to its satisfaction. In such a case, the two firms would have to appoint another ‘escrow agent´ on identical terms.
As per the deal, Tech Mahindra has agreed to deposit the payment within four business days of being declared the successful bidder.
HSBC would have to remit the entire amount in escrow account to Satyam’s bank account immediately (and no later than one business day) on receipt of documents from Satyam and Tech Mahindra showing closure of the share subscription agreement.
The deal would be considered to be closed after Satyam has confirmed receipt of payment in the account, Tech Mahindra has paid all related expenses, Satyam has convened a board meeting to issue and allot shares to Tech Mahindra and to appoint the latter’s nominees as its additional directors.
Upon release of the amount, HSBC would have to close the escrow account.