The Boards of Mahindra Satyam, erstwhile Satyam Computer Services Ltd., and Tech Mahindra Ltd., in their respective meetings on Wednesday approved a proposal to merge together along with certain wholly-owned subsidiaries of both the companies.
As per the swap ratio recommended by the valuers and approved by both the Boards, Mahindra Satyam shareholders will get two equity shares of Rs.10 each of Tech Mahindra for every 17 equity shares of Rs.2 each.
Ernst & Young LLP and KPMG LLP were the independent valuers for the deal. JP Morgan Chase & Co and Morgan Stanley issued fairness opinions on the swap ratio.
On a pro-forma basis, the Mahindra Group will own 26.3 percent in the combined entity, British Telecom will own 12.8 percent. Also, 10.4 percent will be held as treasury stock, 34.4 percent to be held by the public shareholders of Mahindra Satyam and the balance 16.1 percent by the public shareholders of Tech Mahindra.
Under the scheme, Tech Mahindra will issue 10.34 crore new equity shares, thereby increasing its outstanding shares to 23.08 crore and equity capital to Rs.230.8 crore.
The merger will result in combined revenues of around $2.4 billion, and more than 350 active clients (including Fortune Global 500 companies), across 54 countries.
The move ends a tumultuous journey for Satyam, which had come on the brink of collapse after its former chairman and founder Ramalinga Raju said in January 2009 that profits had been overstated and assets falsified in the country's biggest accounting fraud.
The company said the revenues would be well balanced with a diversified global footprint that would boast of contribution from Americas at 42 percent, Europe at 35 percent and Emerging Markets at 23 percent.
C.P. Gurnani, who has been credited largely for Satyam's profitability post the takeover by Tech Mahindra will continue to lead the amalgamated firm as its Chief Executive Officer. Vineet Nayyar, who mentored the top leadership through transition as Chairman, will assume a non-executive role once the company stabilizes, absolving himself of overlooking the company's day-to-day operations. Sanjay Anand, a Tech Mahindra strong hand will be the Chief Financial Officer.
Employees will be permitted to shift across verticals and services after a minimum service period of 18 to 24 months.
Mahindra Satyam may hire a firm to advise the combined entity on operational issues and matters pertaining to strategy and human resources.
Commenting on the merger, Tech Mahindra Chairman Anand G. Mahindra said, "This merger will help propel the combined entity into the top tier of Indian software and services companies, achieving the Group's key objective of being in a leadership role in each of our focus business areas."
Vice-Chairman and Managing Director Vineet Nayyar said, "This merger is a key part of our strategy to delivery industry leading performance."
Mahindra Satyam whole-time Director & CEO C.P. Gurnani stated, "The Mahindra Satyam turnaround is a shining story of determination and grit and now comes to its most important chapter, with this merger."
At the BSE, Satyam Computer Services shares are currently trading at Rs.75.40, up Re.1.25 or 1.69 percent on a volume of around 51,22,000 shares.
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by RTT Staff Writer
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