Hyderabad: The board of Satyam Computer Services Ltd has agreed to sell a 51% stake through a preferential offer, according to B.K. Modi, chairman of Spice Group, which is interested in acquiring the beleaguered software firm—a claim that, if true, would make the acquisition that much more attractive to possible buyers because this stake translates into majority control.
Kiran Karnik, chairman of the government-constituted Satyam board, however, declined to comment on the quantum of stake the board has decided to offer to the strategic investor. “Nothing has been finalized as yet,” he said.
Gearing up: Spice Group’s B.K. Modi says he is in talks with legal experts in the US in order to evolve a strategy to acquire Satyam. Harikrishna Katragadda / Mint
“Only (an) offer of 51% holding will enable the strategic partner (to) have majority control over the company and there is no guarantee that public shareholders will tender 20% in the open offer,” Modi said over phone from Los Angeles.
Under India’s takeover code, an investor who acquires 15% or more of a company needs to make an open offer for another 20% at a price that is not less than the average share price over the previous six months.
The Spice Group has expressed interest in acquiring a majority stake in Satyam. Other companies that have shown interest include engineering firm Larsen and Toubro Ltd (L&T), which already owns 12% of Satyam, Tech Mahindra Ltd and Hinduja group’s HTMT Global Solutions Ltd.
The government dismissed Satyam’s board on 10 January and replaced it with six members headed by Karnik, a former head of software lobby group Nasscom after Satyam’s founder B. Ramalinga Raju on 7 January resigned as chairman and admitted to having fudged the software firm’s accounts to the tune of at least Rs7,136 crore over several years.
Raju, his brother and former managing director B. Rama Raju and former chief financial officer Srinivas Vadlamani have since been arrested. Two auditors of Price Waterhouse, S. Gopalakrishnan and Srinivas Talluri, have also been arrested. Price Waterhouse, a unit of PricewaterhouseCoopers, audited Satyam’s accounts for several years.
Since then, the state-appointed board that took charge has sought to reassure clients and staff, raise money for working capital, appointed new auditors to restate accounts and worked towards attracting a strategic investor who could take a significant stake and management control in Satyam.
It has appointed KPMG and Deloitte Touche Tohmatsu to restate the accounts of the firm and has sought the services of investment bankers Goldman Sachs Group Inc. and Avendus Capital Pvt. Ltd to help identify a strategic partner.
Modi said he is currently in talks with legal experts in the US to evolve a strategy to acquire Satyam and also ascertain the likely impact of class action suits filed against the software firm. “There are two key problems that Satyam is facing now—retaining customers and class action suits in the US—and we are preparing a detailed strategy to address these issues once we acquire the company.”
Modi said his strategy includes inducting two eminent persons from the US on the board of Satyam after acquiring it. “One of them is close to the customers in the US to help the company in retaining the customers, and the other director is a legal expert to assist the company in handling the lawsuits filed against it,” he said, declining to name the individuals.
Modi said he was in touch with Satyam’s board.
“The media reports on (the) Satyam board deciding on 31% preferential offer and 20% open offer are incorrect. I have checked with the board and they have confirmed that they agreed to 51% stake through preferential offer and the 20% open offer will be over and above the preferential offer.”
Modi also cited the clearance given by the Company Law Board (CLB) to Satyam’s board to increase the authorized share capital of the company to Rs280 crore from Rs160 crore by issuing 600 million shares worth Rs2 each.
“The CLB in its order dated 19 February clearly indicated the need for the strategic investor, who pumps in requisite funding to revive the company, to have adequate shareholding in the company to constitute its own board,” said Modi.
He added that Satyam’s board had indicated to him after its Saturday meeting that the pricing for the preferential offer of 51% holding and open offer for another 20% subsequently will be the same.
Sanjay Kalra, president of Tech Mahindra, declined to comment unless there is clarity on what the Satyam board has decided on and would offer to the prospective investor. “The devil is in the details and we will have to wait for the details, which we have been consistently saying. We would prefer to study all the conditions to be specified by the board in totality and not in piecemeal. Till then, we cannot form an opinion of the deal.”
L&T said it is still waiting for clarity from the Satyam board on the preferential offer. Deepak Marada, head, corporate communications at L&T, said: “There is not enough clarity on the issue as yet. We will be in a position to take a call on the issue only after some kind of clarity emerges.”
The Hinduja group’s chief financial officer, Prabal Banerjee, declined specific comment on how much HTMT would prefer to acquire in Satyam, but added that “anyone who is keen on a company would always prefer to acquire controlling stake in it”.