Crisis ridden IT major Satyam Computer Services is contemplating a merger with Indian IT firms in order to avoid a takeover threat by corporate raiders. The firm is in discussions with Delhi-based HCL Technologies and Bangalore-based MindTree for a possible merger. Satyam and HCL are in talks for a cash less merger, reports Business Standard. Both the management and some of Satyam's institutional investors are exploring merger, and it is likely to come at the firms board meeting on 10 January.
Satyam shares have been battered since it announced the Maytas deal, where the firm was to shell out around $2 billion to acquire promoter owned firms in an unrelated business area of infrastructure and real estate development. To add to that, the World Bank barred Satyam for eight years on charges of bribery and theft of information. Since then it has dropped the acquisition plan, and is looking at various measures to pacify investors.
Four independent director have resigned from the board of Satyam and the company has come under serious questions about its corporate governance. The Financial Times has reported today that World Council for Corporate Governance is considering stripping the company of Golden Peacock awarded granted to Satyam last year. Satyam is now trading at very attractive levels for a private equity investors.
Satyam is India's third largest IT firm in terms of market capitalisation, below TCS and Wipro. Mindtree is a relatively small player with market cap below Rs 1,000 crore. The promoter shareholding in the firm has fallen down to 5.13% recently. HCL promoters have shareholding of 67% in their firm. The firm has recently completed the acquisition of UK-based SAP player Axon for $658 million.
Satyam appointed DSP Merrill Lynch as a merchant banker to review and suggest a plan to increase shareholder value, and the latter has reportedly approved of the merger plans.