Tech M stake in Satyam to be 42.7% after preferential issue
Business Standard / New Delhi Jul 03, 2009, 01:10 IST
Tech Mahindra, the new owner of Satyam Computer Services (which is being rebranded as Mahindra Satyam), is in the process of approaching the Satyam board and the Company Law Board (CLB) to acquire additional shares via preferential allotment. The company had tendered an open offer to acquire an additional 20 per cent at Rs 58 a share but there were few takers, since the secondary market price hovered over Rs 70. Tech Mahindra, through its subsidiary Venturbay, had already acquired a 31 per cent stake in the company. Tech Mahindra's Chief Financial Officer Sonjoy Anand explains the company's stance on the issue. Excerpts:
What will be your next step, since the open offer did not get the desired result?
Our open offer was for acquiring the additional 20 per cent of Satyam, which is around 199 million shares. But since the share prices have gone up, the open offer has not been successful (the company’s stock is trading at 30 per cent higher than the open offer price of Rs 58). Some did tender to the open offer, but the number is very small.
So you will now acquire the additional equity through a preferential allotment...
Yes. This has been mentioned in the open offer, too. So now we will go back to Satyam with a request for a preferential offer. We did mention this earlier, that, in such a scenario we will subscribe to shares to make good the difference between the requirement of 199 million shares and the number of shares tendered in the open offer. This will bring our stake in the company to approximately 42.7 per cent. A spokesperson added: The open offer ended as of yesterday and we are in the process of collating the final numbers. The board will take a decision at the earliest, keeping these in consideration.
...and the outlay for this remains the same?
Yes, the outlay for acquiring through preferential offer route remains the same at Rs 1,155 crore. This will be fresh equity being issued by Satyam and the number of shares being acquired as well as the price remains the same.
How soon will this process be over?
It will take some time. We will be approaching the CLB soon. As of now, we have decided only about the preferential offer.
The sale of 31% equity was to raise fresh capital and also to find a new buyer. The competitive bidding process assured that the sale fetched the best price.The open offer was to give the public the benefit of selling their shares at this price.
The share price has since gone above the bid price resulting in poor response in the open offer. Provision for additional issue should the open offer result in poor response was unecessary. Satyam has an owner and there is no legal requireent that this new owner should own more than 31%. As a matter of fact, the additional issue will result in only 43% holding by the new owner.
The additional issue benefits the new owner at the cost of other shareholders. For the company, it raises fresh capital which was in any case not envisaged since if the open offer had been fully subscribed, there would not have been any cash inflow to the company.
Content Guide
Tech Mahindra, the new owner of Satyam Computer Services (which is being rebranded as Mahindra Satyam), is in the process of approaching the Satyam board and the Company Law Board (CLB) to acquire additional shares via preferential allotment. The company had tendered an open offer to acquire an additional 20 per cent at Rs 58 a share but there were few takers, since the secondary market price hovered over Rs 70. Tech Mahindra, through its subsidiary Venturbay, had already acquired a 31 per cent stake in the company. Tech Mahindra's Chief Financial Officer Sonjoy Anand explains the company's stance on the issue. Excerpts:
