The good news for the day was Satyam getting the green signal from SEBI for inducting a strategic partner through sale of 51% m via a global bidding process. Expression of Interest from qualified investors will be invited shortly.
A quick glance at the fine print of the guidelines
Ø Satyam will issue fresh equity of 31% to the investor. Remaining 20% would be made through an open offer at the same share price as the price paid by the investor for the subscription.
Ø Second preferential allotment allowed if bidder fails in first attempt to acquire 51% but this would not be thro’ an open offer.
Ø The investor would have a lock-in of 3 years from the date of the acquisition, though there is no restriction on subscription to additional equity shares.
Ø Qualified investors who bid should have total net assets in excess of US$150 million.
Ø SEBI has exempted Satyam from the normal rules.
Ø International bidding process to be followed.
Ø The process of selection of a strategic investor will be overseen by a retired judge of the Supreme Court or former Chief Justice of India.
This finally comes as a relief to the various suitors of Satyam who have been all along asking for a 515 stake sale. Front runners in the race to acquire Satyam are L&T, Tech Mahindra, B.K.Modi’s Spice group and the latest is global giant IBM.
But this does not mean that companies would now rush to buy the 51% stake. The bidders now want more financial information from the company. Without knowing the real story, which the restated financial of third quarter ended 31st Dec 2008 could most probably throw some light on, how can one really place a worth? L&T and Tech Mahindra have gone on record to say that they have not yet decided on whether to bid or not. They say that unless the company provides complete information about its financial situation, they do not plan to make a move, which makes perfect economic sense.
Then there is the question of the US Class Action Suits, which is estimated to be anywhere between Rs.2,000 – Rs.4,000 crore. However, one legal opinion is that this may not arise at all on Satyam, as the company itself is the biggest victim of fraud committed by its erstwhile promoter Raju, by siphoning off over Rs.5,000 crore, from the kitty of the company. One section also says that it now looks almost confirmed that this amount of Rs.5,000 crore, to a great extent, has been used to create assets of Maytas Infra and Maytas Properties, and hence it is likely to get recovered, maybe, in the next couple of years. So any recovery from this can be used to meet U.S. Class Action Suit liability, and hence on net basis, it may result in nil liability.Since the stake sale of Satyam is being made by preferential issue route, it may see a bidding of upto Rs.100 per share. A potential acquirer, may have to shell out another Rs.1,800 crore to make an open offer for 20% shares, being 18.20 crore of the expanded equity of 91 crore shares, at about Rs.100 per share. So a potential acquirer must have financial ability to contribute close to Rs.4,000 crore for acquiring an effective control of Satyam.
Source: sptulsian.com (By Tulsian)