The March 12 deadline for submitting the Expression of Interest (EOIs) for acquiring Satyam Computer Services saw more than 70 bidders showing an interest in the troubled firm. It is estimated that anywhere between 70- 130 firms have expressed interest. While a report in The Economic Times says there are at least 130 firms, including a clutch of law firms, are interested in acquiring the stake in Satyam, a DNA report suggests that over 70 entities have submitted EOIs.
Satyam board has asked the potential bidders to formally respond to the request for the proposal by 20th March along with a proof that their net worth is at least Rs 1,500 crore. This condition may disqualify many potential buyers for the bidding process.
Till now only 4 firms, Larsen and Toubro (L&T), the Spice Group, iGate and Tech Mahindra, have been able to confirm their interest in acquiring a majority stake in the fraud hit IT firm. L&T comes across as a strong contender, being the largest stake holder in the firm, with a holding of 12%.
Fidelity Investments, which is the second largest stake holder in the company with a 10.17% stake is too learnt to have expressed interest in acquiring the firm. The Spice Group has already said that it is willing to invest $408 million in Satyam, and would like a preferential issue route to acquire 51% stake in the firm.
IBM Global Services, which was also one of the business rivals of Satyam, is too learnt to have shown interest in buying the firm. IBM has registered its interest through a law firm that represents it. The name of the law firm is not yet known. Reports suggest that about 2-3 years back, the global IT firm had undertaken a preliminary evaluation of Satyam with a view to acquire it. IBM, however, denies these reports. Hewlett Packard (HP) is also reported to have submitted an EOI. The firm has been on an acquisition spree as the firm had last year acquired its competitor EDS, through which it now owns a majority stake in Mphasis.
Private equity firms KKR and TPG are also said to have been interested in buying the stake. They may partner with strategic investors to bid for the IT major as the pre-conditions put down by the Satyam board make it mandatory for PE funds to partner with strategic investors to bid for Satyam. Tech Mahindra is also looking at partnering with a PE fund to buy Satyam.
Despite receiving around 130 EOIs, Satyam may find it hard to go ahead with the sale as the lack of clarity on the extent of Satyam’s liabilities may discourage many potential buyers. Also there is significant uncertainty on the damages likely to happen due to the class action law suits filed against the company in the US courts. According to some estimates, the New York Stock Exchange listed IT firm can expect damages of around $500 million. Such ambiguities may result in many interested firms pulling out their EOIs.
US based iGate has already said that it may withdraw its EOI if the information provided by the Satyam board is not satisfactory. The Hinduja Group and Capegemini, which were also the likely bidders, pulled out of the process before the 12th March deadline.
Other names that have come up in links with the Satyam acquisition are CSC (Computer Sciences Corporation), HCL, Essar Group, Carlyle Group, General Atlantic Partners, and Blackstone.
The need for selling the country’s largest IT firm arose when the Satyam promoter, B Ramalinga Raju confessed committing a Rs 7,000 crore accounting fraud on January 7, 2009. The original board of the firm was then dissolved and the government appointed a new board. The new board comprised of Deepak Parekh, chairman of the HDFC Corp, Kiran Karnik, former president of the National Association of Software and Service Companies, and C. Achuthan, a former tribunal member of SEBI.
The board also appointed audit firms KPMG and Deloitte Touche Tohmatsu for restating the company’s accounts. However, there still is lack of clarity on various accounts related issues of the company.
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