Hyderabad: Fraud-hit software services provider Satyam Computer Services Ltd’s government-constituted board wants to offer no more than a 31% stake in an initial sale of new shares to a strategic investor, but is open to a second preferential sale, said a company executive familiar with the matter.
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The board wants the winning bidder for the stake to buy a further 20% through a mandatory open offer to minority shareholders, said the executive, who didn’t want to be named. It would consider another preferential offer only if the investor fails to take the stake to 51% and gain majority control after the open offer concludes, the executive said.
“The intention is to provide an exit route to the company’s minority shareholders through the open offer,” he added.
The board met on Thursday in Hyderabad to discuss and approve procedures for inviting formal expressions of interest from prospective strategic investors in Satyam, whose founder B. Ramalinga Raju on 7 January confessed to having cooked the company’s books to the tune of Rs7,136 crore over several years.
The company made no immediate announcement after the meeting on the bid process, and terms and conditions for bidders. No statement followed the meeting nor were the directors willing to comment on what transpired. A spokeswoman for the company said there were no plans for the directors to meet on Friday, and they “have not scheduled the next” meeting.
Satyam’s board isn’t against a strategic partner holding a controlling stake of 51%, the company executive said.
A preferential offer of 31%, followed by an open offer by the winning bidder to buy 20%, will, however, meet the twin objectives of pumping in much-needed, new funds into the company and providing an exit route to the minority shareholders, he added.
Spice group chairman B.K. Modi had told Mint on 23 February that he was in touch with the Satyam board and that it favoured a 51% preferential offer to the strategic investor to enable it to have a controlling stake.
Modi said Spice would not be interested in less than a 51% holding in the software services firm. India’s leading engineering and construction firm Larsen and Toubro Ltd (L&T), which has a 12% stake in Satyam, the UK-based Hinduja Group and Tech Mahindra Ltd, a unit of the Mahindra Group, have also expressed varying degrees of interest in buying a stake in Satyam.
“Anyone who is keen on a company would always prefer to acquire (a) controlling stake in it,” Hinduja Group’s chief financial officer (CFO) Prabal Banerjee had told Mint earlier.
Sanjay Kalra, president of Tech Mahindra, and L&T spokesperson Deepak Marada said their firms were awaiting clarity from the Satyam board on the preferential offer.
The Satyam executive acknowledged concerns that minority shareholders may not tender 20% through an open offer. In such a situation, the shortfall would be made up through a second preferential offer, he said.
Under Indian takeover laws, an open offer is mandatory once an investor buys at least 15% of a company. The Securities and Exchange Board of India has agreed to ease rules relating to the price at which an open offer must be made. Satyam’s stock slumped by up to 75% after the fraud surfaced.
“The board, which has already sought certain relaxations on pricing of open offer from the market regulator, is of the view that it is unwarranted on its part to seek another relaxation from mandatory open offer requirement,” the Satyam executive said.
Mint could not independently verify the information. Satyam chairman Kiran Karnik refused to comment, saying that he is “not speaking to media today”. Raju, his brother and former managing director B. Rama Raju, and former CFO Srinivas Vadlamani have been arrested since the scam, India’s biggest corporate fraud, surfaced. Satyam’s accounts are being reaudited. Investment bankers Goldman Sachs and Avendus Capital Ltd have been given the mandate to find strategic investors.