Tech Mahindra completes Satyam merger

Four years after acquiring a strategic stake in the auditing scam-tainted Mahindra Satyam Ltd (formerly Satyam Computer Services Ltd), IT services firm Tech Mahindra Ltd said on Tuesday it had completed the merger of Mahindra Satyam with itself, creating the fifth largest software services company with revenues of $2.7 billion and 84,000 employees. It is now behind TCS, Wipro, Infosys and HCL.

The separate branding of Mahindra Satyam will be discontinued and the merged firm will sport the Tech Mahindra banner, which has got a new look.

“Today, we have fulfilled the commitment made in 2009, when we acquired Satyam, to jointly become one of the largest, diversified players, leveraging technology for business solutions. Tech Mahindra is a testimony to the tireless efforts of our associates and the trust reposed by our investors,” said Anand Mahindra, group chairman of Mahindra & Mahindra.

The boards of Tech Mahindra and Mahindra Satyam had approved the merger on March 21, 2012. After an approval from the Mumbai High Court, the merger had been awaiting the clearance from the Andhra Pradesh High Court, which gave the nod on June 11, 2013. The separate scheduled AGM of Mahindra Satyam stands terminated.

“Over the past four years, while we worked through the statutory and legal issues, our teams worked closely on the ground to integrate processes, eliminate overlaps, leverage best practices and deliver enhanced value to all our stakeholders. Today, as we formally become one, our unified go-to-market strategy will allow us to meet the growing needs of businesses with renewed vigour and pro-activeness,” said Vineet Nayyar, executive vice-chairman of Tech Mahindra.

The deal also sees the end of the long-drawn saga of Satyam which went down from being one of the top IT firms to an auditing scandal-tainted company. The scandal was orchestrated by its own promoters, led by Ramalinga Raju (See the timeline here).

Tech Mahindra became the highest bidder to acquire a strategic stake in the company, which also catapulted Tech Mahindra to the big league. Initially, it had acquired 31 per cent stake through a preferential allotment for around $350 million and later raised its holding. As of March 31, 2013, it held 42.6 per cent stake in Mahindra Satyam.

Given the previously announced merger, stock swap ratio of 2 shares of Tech Mahindra for every 17 shares of Mahindra Satyam, and the latest share price, the merger is valued at over Rs 14,000 crore ($2.3 billion).

Given that some of the shares will be extinguished, resulting into a total issue of 103.4 million shares of Tech Mahindra, the transaction will actually translate in total issue of shares worth Rs 10,484 crore ($1.75 billion), as per the last traded price of shares.

The firms have fixed July 5 as the record date for the share swap, that would formally complete the merger. Mahindra Satyam counts among its institutional shareholders Abu Dhabi Investment Authority, one of the two sovereign wealth funds of the UAE.

Tech Mahindra scrip was quoting at Rs 1,014, up 1.5 per cent on the BSE in mid-day trades in a strong Mumbai market on Tuesday.

Mahindra & Mahindra Ltd will remain the single largest shareholder of the merged entity with around 26 per cent stake, followed by British Telecommunications Plc. There will also be a substantial treasury stock created out of the merger. The public shareholders of Mahindra Satyam will own a larger chunk of the merged entity, compared to their peers who comprise public holding of Tech Mahindra before the merger.

(Edited by Sanghamitra Mandal)

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