Hardware

Return to Article

Tech Mahindra Buys 31% of Satyam

The Associated Press

By Erika Kinetz

MUMBAI, India -- Indian telecommunications firm Tech Mahindra has bought a controlling stake in Satyam Computer Services(SAY Quote), the outsourcing giant nearly brought down in a $1 billion fraud.

Tech Mahindra purchased 31% of Satyam for $351 million, the highest bid submitted before the Monday morning deadline. It will also make an offer on the open market to buy an additional 20% of Satyam.

Tech Mahindra, which is owned by India's Mahindra & Mahindra Ltd. and British Telecommunications, beat out Larsen & Toubro, one of India's largest engineering conglomerates, which acquired a 12% stake in Satyam from late last year into January.

"We hope this will infuse greater confidence and comfort amongst customers," Kiran Karnik, Satyam's chairman, said Monday.

The winning bidder must be approved by the government.

Satyam was plunged into turmoil Jan. 7 when founder B. Ramalinga Raju confessed to a $1 billion fraud.

Raju and eight others, including two auditors from Price Waterhouse, are facing charges of criminal conspiracy, cheating and forgery for allegedly stealing millions of dollars from the company.

Satyam, once India's fourth-largest outsourcing company, has been fighting for its survival since Raju's confession. The sale had taken on urgency amid media reports that clients and staff have been leaving

Suitors faced the difficult task of valuing Satyam before its scrambled books had been untangled. Satyam, which is listed on the New York Stock Exchange, also faces a spate of class action lawsuits in the United States.

Ratings agency Fitch was so concerned about these uncertainties that it withdrew its rating from Tech Mahindra after the company expressed interest in acquiring Satyam.

Tech Mahindra's 31% stake in Satyam will be acquired by buying new Satyam shares.

Bidders were required to have total net assets of at least $150 million and agreed to a three-year lock-in of their ownership stake.