Mumbai: The sale plan for Satyam Computer Services Ltd is finally clear.

The scam-hit software exporter will be sold to the highest bidder in a “transparent" and “competitive" process, after capital markets regulator Securities and Exchanges Board of India (Sebi) said on Friday that it has amended the country’s takeover norms.

No hostile bids can be made thereafter.

Sebi, in a notification, amended the Substantial Acquisition of Shares and Takeovers (SAST) Regulation for distressed companies, whose boards have been reconstructed by the government.

This also means Sebi may not cut short the open offer price formula as it had announced earlier February.

A lower open offer price would have helped engineering company Larsen and Toubro Ltd (L&T), which owns 12% in Satyam, to buy it cheap.

“The (open offer) formula goes out of the window," said Akil Hirani, managing partner at corporate law firm Majmudar and Co.

An open offer to buy public float at a pre-determined price gets triggered when an entity buys up to 15% stake in a publicly traded firm.

Market participants welcomed Sebi’s move, calling it impartial and positive for Satyam shareholders. “This will help Satyam shareholders fetch higher value than in the case of an amended open offer price formula," said the head of equity research at a foreign institutional brokerage, who did not want to be named.

Spice group promoter B.K. Modi, another suitor for Satyam, also welcomed the Sebi decision. “We will definitely participate in the auction," he told Mint by phone from Hyderabad.

Also Read Sebi bans First Global’s Shankar Sharma for 1 yr

Modi, who late last year sold his family’s stake in a mobile phone services firm he controlled together with Telekom Malaysia Bhd for at least Rs2,700 crore, said his interest in Satyam was “as strong as we said in the past".

Apart from L&T and Modi, others such Tech Mahindra Ltd had expressed interest in Satyam.

“There is now no ambiguity about the 26-week average (open offer) pricing. The final bid price will be the open offer price," said Hirani.

L&T has lost the competitive advantage it enjoyed to make an open offer. Soon after Sebi announced its decision on 2 February to lower the open offer price for Satyam, television channel CNBC-TV18 reported that L&T would consider raising its stake to 15% from about 12%.

“We haven’t seen the details of the (Sebi) guidelines. We would not like to comment," L&T spokesperson D. Morada said. “L&T continues to enjoy a mathematical advantage," said a senior investment banker who has close relations with L&T. According to him, the Satyam sale process will now happen in two steps.

In the first part, the Satyam board and its sale advisers, Goldman Sachs and Avendus Advisors Pvt. Ltd, will formulate the eligibility criteria for potential bidders. Based on this, three-five bidders may be chosen from the pool of interested parties.

In the second step, the financial bids will be invited.

“All the eligible bidders may look to buy 51% stake to take control of the company. L&T will have to buy just another 38%," the investment banker said.

“The onus will now be on the board of Satyam... They’ll have to take a call. We will respond after they (Satyam board) take a call," said an L&T executive. According to him, Sebi’s decision will ensure that only serious players are in the fray to acquire a controlling interest in Satyam.

Now that the government and Sebi have decided to sell Satyam through an auction, the speed of sale process will be critical for the bidding price, said analysts and investment bankers. If the process is slow, some key clients may terminate contracts and this could directly impact the bid value, said the investment banker close to L&T.

Mumbai-based Enam Securities Pvt. Ltd is Modi’s financial adviser in the Satyam bidding process.

Any bidder, according to Modi, would also have to take into account the class action and other suits against Satyam.

“The legal suits range from $450 million to $800 million (Rs2,192-3,896 crore). A bidder will have to look at the probability of this liability. Then, balance it against the probability of revenues, profits, employee productivity, etc., and take a call," said Modi.

Satish John contributed to this story.

My Reads Logout