NEW DELHI — Tech Mahindra, a joint venture between British Telecom and the Indian conglomerate Mahindra & Mahindra, stands to win control of Satyam Computer Services after a bid that values the fraud-damaged company at $1.2 billion.
Tech Mahindra was the highest bidder for Satyam, with a 58 rupee, or $1.16, per share bid, for 31 percent of the company, Satyam said Monday. The offer beats a bid from the Indian engineering firm Larsen & Toubro, which already owns a 12 percent stake in Satyam.
Tech Mahindra will later make an offer for an additional 20 percent of Satyam’s shares on the open market, which will give it a controlling stake.
“The selection of the highest bidder, in a fair, open and transparent process, signals a new stage for the company in its progress towards stabilization and growth,” said Kiran Karnik, chairman of Satyam’s board. “We hope this will infuse greater confidence and comfort amongst customers.”
The American vulture investor Wilbur Ross and Cognizant Technologies, which is based in Teaneck, New Jersey, also did due diligence on Satyam, though was unclear if they made a bid for the company.
Satyam was one of India’s largest information technology companies, with more than 50,000 employees and a market capitalization of over $7 billion, before one of the company’s founders said in January he had faked about $1 billion in cash and inflated the company’s operating margins. Indian investigators have since said that more than a dozen people in the company’s finance department were involved in the fraud, including a team who churned out fake invoices and bank statements.
Satyam serves as the back office and information technology provider for hundreds of the world’s largest companies, including Nestlé and General Electric. The Indian government took control of the company and pushed through a quick sale, in order to prevent losses in the country’s $71 billion outsourcing industry.
Tech Mahindra, which provides information technology services to the telecom industry, has less than half the workforce of Satyam. More than half of the company’s business is serving one client, British Telecom, which owns a minority stake in Tech Mahindra. The deal would bring Tech Mahindra business in new industries from manufacturing to financial services.
“Tech Mahindra has a broader plan for expansion,” said Sudin Apte, an analyst with Forrester Research in Pune. The winning bidder is seeing an “opportunity, rather than just taking over Satyam’s clients,” he said.
India’s Company Law Board needs to review the bid and approve the transaction.
The deal sent Satyam shares 6.5 percent higher to 50.4 rupees in India early Monday afternoon. Shares in Tech Mahindra were up more than 13 percent, to trade at 41.95 rupees.
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